Part of the process of petitioning for bankruptcy under Chapter 7 (“liquidation” bankruptcy) is that the debtor must compile a list of property in his or her possession. The bankruptcy court and the bankruptcy trustee will use this list to determine what property may be sold off and the proceeds of sale used to pay claims of creditors.

Not all property of the debtor will be subject to sale. Bankruptcy law, specifically 11 U.S.C. §522(b), recognizes certain categories of “exemptions” for property. The debtor has the choice of using either the federal property exemptions, or any available state scheme of exemptions (the federal law allows states to enact their own alternative property exemption statutes).

New Jersey has its own exemption statutes consistent with this allowance under the federal law. The statutes are spread across different sections, covering various categories such as insurance, pensions, personal property and even wages, which can make identifying all of them difficult to do. Some notable points to bear in mind about the New Jersey exemptions are:

  • You can use either the federal or the New Jersey property exemptions, but not both. That is, you cannot pick and choose between federal and state law on an “a la carte” basis to maximize your exemptions. With the assistance of your bankruptcy attorney, you must decide which exemptions, federal or state , make the most sense for you.
  • With a limited exception for property held by tenants in the entirety, there is no “homestead exemption” under New Jersey law.
  • The New Jersey general property or “wildcard” exemption is $1,000.

Each person’s reasons for making use of bankruptcy laws, and the specific financial and property circumstances involved, are unique. An important role of a bankruptcy attorney is to help guide the debtor through the intricacies of the applicable federal and state bankruptcy laws so that each individual client can come out of the process in the best position possible.