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Bankruptcy: New Jersey

Filing bankruptcy in New Jersey gives honest debtors an opportunity to recover from debt and repays creditors to the extent that a debtor’s property value or earnings permit.  40,369 bankruptcies were filed in New Jersey in 2010, ranking New Jersey 26th in the country for the number of bankruptcy filings per capita. 78% of New Jersey’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in New Jersey

Federal law regulates bankruptcy proceedings in New Jersey, and as such, all bankruptcy cases are filed in the US Bankruptcy Courts located in Camden, Newark and Trenton.  Although federal courts have exclusive jurisdiction over bankruptcy proceedings, New Jersey law permits petitioners to use the exemptions found in the U.S. bankruptcy code or the exemptions provided under New Jersey law. The exemption systems are not interchangeable. With the expert counsel of a bankruptcy attorney New Jersey petitioners can be aware of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, New Jersey

Chapter 7 bankruptcies in New Jersey are the most common personal bankruptcy filing.  Chapter 7 is best suited to petitioners who lack major assets such as investments or significant equity in a home, because a Bankruptcy Trustee may liquidate personal property that is not protected by New Jersey’s bankruptcy exemptions. Liquidation occurs when a court-appointed Trustee converts personal assets to cash to distribute to creditors. New Jersey’s Chapter 7 bankruptcy law allows petitioners to keep some essential property and these exempt assets cannot be claimed by creditors looking for repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

New Jersey Bankruptcy Exemptions

New Jersey bankruptcy law designates detailed property exemptions that enable debtors to keep some personal property and assets so bankruptcy proceedings do not leave them destitute.  Bankruptcy in New Jersey lets petitioners choose exemptions from either the federal list or the state list.

Due to changes in exemption amounts, those planning to file bankruptcy may wish to speak with a New Jersey bankruptcy attorney to find out which exemptions are applicable to their current financial situation.  New Jersey bankruptcy exemptions include:

New Jersey Homestead Exemption

  • None, but survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of a single spouse

New Jersey Tenancy by Entirety Exemption

  • Survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of a single spouse

New Jersey Personal Property Exemption

  • $1,000 total: Furniture and household goods
  • $1,000 total: Personal property and possessions of any kind, stock or interest in corporations
  • Clothing
  • Burial plots

New Jersey Wage Garnishment Exemption

  • 90% of earned but unpaid wages if annual income under 250% of the poverty level for family size; 75% if annual income is more than that amount
  • Wages or allowances received by military personnel

New Jersey Public Benefits Exemption

  • Old age, permanent disability assistance
  • Workers’ and Unemployment compensation

New Jersey Insurance Exemption

  • Health or disability benefits
  • $500 per month: Annuity contract proceeds  
  • Disability or death benefits for military member
  • Disability, death, medical, or hospital benefits for civil defense workers
  • Group life or health policy or proceeds
  • Life insurance proceeds or avails if you’re not the insured
  • Life insurance proceeds if clause prohibits proceeds from being used to pay beneficiary’s creditors

New Jersey Pensions and Retirement Savings Exemption

  • Alcohol beverage control officers
  • City boards of health employees
  • Civil defense workers
  • Firefighters, police officers, traffic officers and State police
  • Judges
  • Municipal, Public and County employees
  • Prison employees
  • School district employees and Teachers
  • Street and water department employees
  • ERISA-qualified benefits for city employees
  • IRAs
  • Trust containing personal property created pursuant to federal tax law, including 401(k) plans and higher education (529) savings plans, IRAs, Roth IRAs Excluded from bankruptcy estate

Chapter 13 Bankruptcy, New Jersey

In 2010, 22% of petitioners filed Chapter 13 bankruptcy in New Jersey.  Filing for protection under Chapter 13 bankruptcy in New Jersey involves gaining the assistance of a court-appointed Trustee to restructure the petitioner’s debts and implement a 3-5 year repayment plan, using the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in New Jersey keep most – or all – of their property.

How to File Bankruptcy in New Jersey

Qualifying for key property exemptions should be a primary deciding factor when considering bankruptcy as a way out of financial problems. The most favorable outcome would include protecting major assets and discharging debts.  A New Jersey bankruptcy attorney can explain bankruptcy exemption restrictions and provide guidance on the benefits and drawbacks of Chapter 7 and Chapter 13 bankruptcy.

Bankruptcy Attorney: New Jersey

For many, bankruptcy procedures can be upsetting and complex.  A New Jersey bankruptcy attorney can guide petitioners through bankruptcy exemption procedures and provide expert counsel on the suitable bankruptcy options for their financial situation.