Bankruptcy Exemptions
One of the most commonly asked questions by individuals who either need
to or are considering filing for
Chapter 7 or
Chapter 13 bankruptcy protection, is whether they will be able to keep/protect their
assets from being seized and/or sold by their creditors or the Court appointed
Bankruptcy Trustee. In the overwhelming majority of cases the answer is
an unequivocal, yes. In New Jersey debtors are given the right to protect
all of their assets by asserting the exemptions available to them (which
is the amount of equity debtors are allowed to keep in the particular
category of assets) under either §522 of the U.S. Bankruptcy Code
or New Jersey state law. Since the exemptions available under§522
are exponentially greater than those allowed by New Jersey state law almost
every individual debtor filing for bankruptcy protection in New Jersey
chooses to protect their assets pursuant to §522, also known as the
federal exemptions.
In the vast majority of cases, a debtor's assets will fall 100% within
the exemptions/protections provided by §522 of the US Bankruptcy
Code. A bankruptcy exemption is by definition an amount of money and/or
equity that a debtor or joint debtors are allowed to keep in a particular
category of asset. If a debtor's interest/equity in the specific category
of assets is the same or less than the amount of the bankruptcy exemption
allotted to that particular asset, then the asset is fully protected from
attachment or seizure by the Chapter 7 or 13 Trustee, or by any of the
debtor's creditors. In most Chapter 7 and 13 cases the decision as
to whether or not a debtor has any interest/equity in a particular asset,
above that allotted by the Bankruptcy Code, is made by the Chapter 7 or
13 Trustee.
Below are several of the many asset categories protected by§522, and
the specific amount of the exemptions (equity) debtors are allowed to
keep in the asset category described.
DESCRIPTION |
INDIVIDUAL |
JOINT |
Real Property |
$26,150.00 |
$50,300.00 |
Motor Vehicle |
$4,000.00 |
$8,000.00 |
Household Goods |
$13,400.00 |
$26,800.00 |
Personal Injury (proceeds from a lawsuit or Settlement) |
$25,150.00 |
$50,300.00 |
Jewelry |
$1,700.00 |
$3,400.00 |
Wildcard- Any Property can be used to protect any asset category (the amounts
assume no homeownership) |
$13,900.00 |
27,800.00 |
The above list includes most of the major federal exemption categories
protected by allowed §522 but there are also many other less commonly
used exemptions provided for under §522 of the U.S. Bankruptcy Code.
These federal exemptions, as indicated above, are different in description
and the amount being protected, from the various state exemptions including
New Jersey's exemptions. I wanted the reader to be aware, however,
that, while a New Jersey debtor might never choose the New Jersey exemptions
over the federal exemptions, a debtor filing for bankruptcy protection
in New York may well choose the New York exemptions which allows a homeowners
in lower NY State to keep $170,825.00 equity in his/her home and a joint
homeowners up to $341,650.00 of equity in their homes, respectively, as
opposed to§522 which allows individual and joint debtor homeowners
to keep only $25,150 and $50,300 of equity in their homes, respectively.
As an example of how these exemptions are applied to an individual or joint
debtor's case, under the §522 or federal wildcard exemption,
a debtor or joint debtors can only protect up to an additional $11,975.00
or $23,950.00 of equity, respectively, in any particular asset which is
not fully protected/covered by the specific exemption amount allowed for
that asset category. So more specifically, if joint debtors in New Jersey
have $10,000 of equity in 1 of their vehicles, they would only be able
to protect a total of $8000 of equity in their vehicle under the motor
vehicle exemption, but could easily protect the remaining $2000 of equity
they have in their vehicle through assertion of their §522 wildcard
exemption (see §522 exemptions tables).
In the overwhelming majority of cases, the assets owned by prospective
debtors clearly fall within the §522 exemption limits, and are accordingly
fully protected by The United States Bankruptcy Code. Understanding your
exemptions is one of the most important legal issues prior to filing a
bankruptcy so consultation with an experienced bankruptcy attorney is
critical. To learn what exemptions you may qualify for contact our firm
to make an appointment with Mr. Alster today. Also see article in this
website entitled "A Chapter 7 Trustee's duties and obligations with regard to seizing
a debtor's asset."
Need an attorney for debt elimination in Hackensack, NJ?
Mr. Alster trusts that the above information will hopefully make all individual(s)
who are considering filing for personal ,bankruptcy protection aware of
the importance of consulting with and being represented by an experienced
bankruptcy lawyer who has expertise in dealing with these issues. There
are many non-lawyers advertising their credentials to draft bankruptcy
petitions and/or represent debtors at the Trustee meeting (also called
the 341A hearing). Individuals should realize that a non-lawyer cannot
appear and/or represent debtors in Bankruptcy Court should a problem arise
concerning these or any other legal issues.