One of the simplest protections available to those facing financial trouble today is a Chapter 7 bankruptcy petition. As a means of liquidating some assets to pay off outstanding debt, of erasing other debt, and of claiming exemptions on some forms of personal property, Chapter 7 can provide a consumer with a fresh start.
There are exemptions for vital forms of personal property in both federal and state statutes. And while some states require residents to use only those exemptions enumerated in their state statutes, New Jersey allows residents to choose between the two, as long as they do not mix them. However, it is clear that for most of those New Jersey residents filing for Chapter 7, federal statutes will be the most beneficial.
How to Keep Your Car
State and federal exemptions differ in this area:
- Federal exemption – $3,225
- New Jersey state exemption – none
The federal vehicle exemption may allow a debtor to erase their consumer debts in terms of their credit record; however, if that loan is secured by the vehicle itself, the debtor must continue to pay off that loan or face repossession.
How to Keep Your Home
- Federal homestead exemption - $20,200
- New Jersey state exemption – none
Like a vehicle loan secured by the vehicle, a mortgage loan secured by the property can still be reclaimed, or foreclosed upon, by the creditor if the homeowner fails to keep up their payments.
New Jersey allows exemptions for other forms of personal property:
- Clothing, goods, personal property, stock or interest in corporations – up to $1,000
- Household goods and furniture – up to $1,000
- Burial plots
- Tools of the trade – none
Filing Schedule C of a Bankruptcy Petition
In order to claim any of the state or federal exemptions available under Chapter 7 bankruptcy, the filer must complete Schedule C of the bankruptcy petition. This form confirms whether the consumer is choosing federal or state exemptions, and the value of the property and exemption being claimed, by supplying the following information:
- The property type
- The state or federal statutes that apply
- The value of the property exemption
- The current assessed value of the property (not the market value)
Getting Legal Help
Because the property exemptions in New Jersey state laws are so small in comparison to federal laws, the majority of those filing for bankruptcy generally choose the federal options. However, that is not necessarily a one-size-fits-all option.
There are circumstances when a filer can receive the most benefit from the state exemptions. In order to make that decision, it can be important to enlist the aid of an expert, generally an accomplished bankruptcy lawyer. Such expertise can be invaluable in clearing a consumer’s credit record and preparing to build a more economically sound financial future.
