One of the misconceptions about filing for a Chapter 7 bankruptcy is that the debtor will have to forfeit much of their property. But the fact is that in most cases, liquidation of assets can be significantly avoided by exercising allowable exemptions.

Bankruptcy laws are designed to help you get a fresh start — not punish you by taking everything you need to live. In New Jersey, you can choose to follow federal exemptions or state exemptions, but you cannot pick and choose from each. If you are a couple filing jointly, you may double the exemption amount in each category.

These are some of the exemptions you can claim when filing for Chapter 7 bankruptcy:

• Qualified homestead exemption — New Jersey doesn’t offer a homestead exemption, but you can avail yourself of the federal homestead exemption, which as of 2024 covers $27,900 of the equity in your home.

• Motor vehicles — New Jersey doesn’t offer a motor vehicle exemption, but federal rules allow you to exempt up to $4,450 in equity.

• Reasonably necessary clothing, household goods, furnishings and appliances — These include everyday essential items such as the clothes you wear, your couch and toaster oven, but not valuable artwork or crystal glassware. Federal exemptions are $700 per item with a $14,875 aggregate value.

• Jewelry — Items worth up to $1,875 are exempt. If a single item is worth more, you would have to either borrow or sell another exempt item to make up the difference.

• Tools of your trade or profession — You can exempt up to $2,800 for tools, implements and books used in your work.

Other exempt categories include:

• $14,875 in loan value, accrued dividends or a life insurance policy interest

• $27,900 for personal injury awards, except for pain and suffering or monetary loss

• A portion of unpaid wages

• Funds in a bank account derived from public benefits, including Social Security, public assistance and unemployment compensation

Whether Chapter 7 is right for you in your circumstances depends on several factors. An experienced bankruptcy lawyer can guide you through the process to ensure that you retain as much of your personal property as possible. 

The Law Offices of James C. Zimmermann provides legal assistance in all bankruptcy and debt relief matters. We have offices in Hackensack, Vernon, Wayne, Pompton Lakes and Nutley, New Jersey. Call 973-764-1633 or contact us online for a free consultation.