Bankruptcy Exemptions

bankruptcy exemptions

What is a Bankruptcy Exemption?

Bankruptcy exemptions protect certain assets in a bankruptcy filing. Some bankruptcy exemptions protect the full value of an asset while other exemptions protect a specific amount of equity in a particular asset. Bankruptcy exemptions allow you to keep most of your property when you file a bankruptcy case. The exemptions are available regardless of the chapter of bankruptcy being filed, including Chapter 7, Chapter 13, and Chapter 11.

Federal Bankruptcy Exemptions vs. State Bankruptcy Exemptions

Congress created bankruptcy exemptions and set the limits for federal bankruptcy exemptions. Each state has a set of state bankruptcy exemptions that debtors may use.

Many states allow debtors in bankruptcy to choose between federal bankruptcy exemptions and state bankruptcy exemptions, including New Jersey and New York. The choice between federal and state exemptions can be important. A New Jersey bankruptcy attorney can evaluate your situation to determine which set of bankruptcy exemptions provide the greatest protection of assets in bankruptcy.

Federal bankruptcy exemptions are adjusted every three years on April 1. The next scheduled change for federal bankruptcy exemptions is on April 1, 2022. As of April 1, 2019, some of the common federal bankruptcy exemptions used by debtors include:

  • $12,575 in equity for a homestead
  • $4,000 for a motor vehicle
  • $1,700 for jewelry
  • $1,362,800 for IRAs and Roth IRAs
  • $2,525 for tools of the trade (business assets)
  • $13,400 for loan values or cash values in a life insurance policy
  • $1,325 wildcard exemption and up to $12,575 of any unused portion of the homestead exemption

Many items are protected up to their full value, including pensions, most tax-exempt retirement accounts, public assistance, Social Security, unemployment compensation, Veteran’s benefits, and domestic support.

What are the Bankruptcy Exemptions for New Jersey?

New Jersey allows bankruptcy debtors to choose between federal bankruptcy exemptions and state bankruptcy exemptions. The amount allowed for New Jersey state exemptions may also change. The amounts below are current as of August 2019. In contrast to the federal exemptions, NJ bankruptcy exemptions allow:

  • No homestead exemption is allowed
  • All clothing is exempt
  • Up to $1,000 of personal property, including vehicles
  • Up to $1,000 of furniture

Most individuals who file bankruptcy in New Jersey opt to use federal bankruptcy exemptions because the federal exemptions provide more protection of assets in bankruptcy.

What are the Bankruptcy Exemptions for New York?

New York also allows debts to choose between federal and state bankruptcy exemptions. The amount allowed for New York state exemptions may also change. The amounts below are current as of August 2019. In contrast to the federal exemptions, NY bankruptcy exemptions allow:
  • Homestead exemptions vary by the county where the home is located. For most counties, the homestead exemption is $82,775. However, the exemption increases for some counties. Debtors with homes in Nassau, Putnam, Suffolk, Rockland, Queens, Kings, Richmond, and Bronx counties can exempt up to $170,825 for their homestead. Debtors in Ulster, Dutchess, Orange, Albany, Saratoga, and Columbia counties have a homestead exemption of $142,350. A New Jersey bankruptcy attorney should review your case to determine the exact homestead exemption if you choose state bankruptcy exemptions.
  • $4,550 for a vehicle or $11,375 if the vehicle is equipped for a debtor with disabilities
  • Up to $11,375 for personal property, household goods, and tools of the trade (some property may have specific amounts for exemptions)
New York has more generous state bankruptcy exemptions compared to New Jersey. However, a New Jersey bankruptcy attorney should still review your case to determine whether state or federal bankruptcy exemptions are the best choice given your financial situation.

Learn More About Bankruptcy Exemptions from an Experienced New Jersey Bankruptcy Lawyer

Choosing between federal and state bankruptcy exemptions can have a significant impact on your bankruptcy case. You need to choose the exemptions that provide the highest level of protection from creditors and the court. In most cases, a Chapter 7 debtor does not lose any property because the net equity in the debtor’s property falls below the exemption amounts or the equity in the property is of “inconsequential value.” A Chapter 7 trustee may declare that the asset is of inconsequential value when the equity is not enough to justify selling
the asset and administering a Chapter 7 asset case.

If a debtor has property that is not exempt, filing a Chapter 13 case may be an option. In Chapter 13, you can protect non-exempt assets while getting out of debt. The bankruptcy repayment plan allows you to restructure debts. In many cases, debtors only pay a small percentage of their unsecured debt (credit cards, medical bills, etc.) through a Chapter 13 plan.

If you want to explore debt relief options, including Chapter 7 or Chapter 13, contact the Silverberg Law Firm to schedule a free consultation with a bankruptcy attorney in New Jersey. In New Jersey call (201) 252-7000 and in New York call (212) 687-7000.

New York Bankruptcy Lawyer Jay Silverberg

Our firm proudly practices bankruptcy law and is considered a debt relief agency under federal law. We help people file for bankruptcy relief under the United States Bankruptcy Code.

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