When New Jersey consumers file for bankruptcy, they have a right to choose between the state bankruptcy exemptions and the federal bankruptcy exemptions. These exemptions protect some level of property of the filer as they go through the bankruptcy process. On April 1, 2022, new federal bankruptcy exemption levels went into effect. You must claim either the federal or the state exemptions overall, and you cannot mix and match between the two systems.
Role of bankruptcy exemptions
If you are filing for Chapter 7 bankruptcy, you can keep the exempted amounts of property, while the rest of your property is liquidated. Under Chapter 13 bankruptcy, you can keep all of your property but pay your creditors through a Chapter 13 payment plan. Every three years, the federal exemptions are adjusted for inflation. The new federal exemptions protect more consumer property as the dollar amount was raised.
New federal exemption limits
Some of the federal exemptions include:
- $27,900 in homestead exemption
- $4,450 for a motor vehicle
- $700 per household item, with a total of $14,875 in items
- $1,875 in jewelry
- $1,475 in any “wild card” property, with an additional $13,950 if you did not use the homestead exemption
- $2,800 in tools for your trade or profession
- $14,875 in life insurance policies
- $27,900 in personal injury claims
- All Social Security, unemployment, public assistance or veterans’ benefits
These come in addition to the existing $1,512,350 exemption for retirement accounts such as IRAs, Roth IRAs, 401(k)s, 403(b)s and similar structured retirement funds.
There are many factors to consider when determining which type of exemptions to pursue and which chapter of bankruptcy may be a better choice for your situation.