Chapter 7 bankruptcy allows eligible debtors to discharge their debt, making it an appealing option for many people living paycheck to paycheck with little hope of catching up on accrued debt.

But while you may be able to eliminate all of your debt through Chapter 7, it isn’t a free ride. The bankruptcy trustee appointed to administer your case must pay off as much of your debt as possible by selling or liquidating nonexempt assets, such as cash, second homes, second vehicles, and stocks or bonds. And although most unsecured debt — such as credit card debt, personal loans, medical bills and some taxes — will be forgiven, you will still owe secured creditors, such as mortgage and auto lenders.

Fortunately, those who file Chapter 7 don’t have to liquidate all of their property. Bankruptcy laws are designed to help you hit the restart button — 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 2019 covers $170,350 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 $4,000 in equity.
• Reasonably necessary clothing, household goods, furnishings and appliances — This applies to everyday items you need to live — such as the clothes you wear daily, your couch and toaster oven, not valuable artwork or crystal glassware. Federal exemptions are $625 per item with a $13,400 aggregate value.
• Jewelry — Items worth up to $1,700 are exempt through federal bankruptcy law. But if your engagement ring is worth, say, $3,000, you would have to either borrow or sell another exempt item to make up the $1,300 difference.

Other exempt categories include:

• Tools of your trade or profession, up to a certain value
• A portion of unpaid wages
• Funds in a bank account derived from public benefits, including Social Security, public assistance and unemployment compensation
• Damages awarded for personal injury

Whether Chapter 7 is right for you and your circumstances depends on several factors, which you should discuss with an experienced bankruptcy lawyer.  A knowledgeable attorney can guide you through the process to ensure you retain as much of your personal property as possible. At the Law Offices of James C. Zimmermann, we take the time to explain your options and find the debt relief strategy that is best for you and your family. Call us at 973-764-1633 or contact us online. We have offices conveniently located in Vernon, Wayne, Pompton Lakes, Hackensack and Nutley, New Jersey.