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What Are Exemptions to Bankruptcy?

What Are Exemptions to Bankruptcy?

Interviewer: I’m sure one of the beliefs in bankruptcy the court will take everything you own, but they don’t, is that right? Aren’t there exemptions to bankruptcy?

Bankruptcy Exemptions Allow You to Retain Your Possessions

Tanya: Exactly, there is a lot of property that’s exempt so you can pass through the bankruptcy really being able to retain most of your belongings.

Interviewer: What are some of the assets you can keep and what are the levels approximately?

There Are Two Levels of Bankruptcy Exemptions, a State and a Federal

Tanya: There’s an amount of equity that you’re allowed to keep in your house in New Jersey. First of all, there are two different kinds of exemptions; there’s state and there’s federal and you can choose.

The State Exemption Statutes Differ from State-to-State with Some Being More Lenient than Others

Bankruptcy law is federal; however, each state legislature has dictated different exemptions. You do hear about being able to go to Florida or Texas and you can own a big giant house free and clear and they can’t take it from you in bankruptcy. There are states where people can go and invest in different assets and protect those items from the bankruptcy filing and the bankruptcy court.

New Jersey Allows for a $22,975 Exemption in Real Estate per Individual

This amount periodically changes. New York is different than New Jersey also. Each state has its own statutes and then there are the federal exemptions. In New Jersey, we typically use the federal exemptions. For example, with real estate in New Jersey, each person right now is entitled to $22,975 of equity in their house.

These Exemptions Enable Many People to Retain Ownership of Their Homes

If a couple owns a house, the exemption is double. It is approximately $46,000 of equity.

If your house is worth $300,000 and your mortgage is $250,000, you can certainly stay in that house if you continue to pay the mortgage.

Apart from that, you could have $50,000 of credit card debt and you file for bankruptcy. That would discharge the credit card debt completely. You could stay in that house and have the $46,000 or $50,000 of equity. Between the mortgage and the exemption, there’s no money left to take to pay creditors.

Are Other Assets Protected by Exemptions?

Interviewer: What about cars?

Tanya: Household goods and furnishings, such as clothing and appliances, have liquidation values. It’s not replacement value.

The exemption for that is $12,250.

With the equity in a car, again, it doesn’t have to be free and clear, it’s just the difference between the value and what you owe on it is $3,675. There is an exemption for tools and implements of trade, which is $2,300.

A Wild Card Exemption Can Protect a Bank Account up to a Certain Amount

Obviously a lot of people don’t own a home, so there is under the law what’s a called a wild card exemption. With a wild card exemption you can actually have this amount in the bank and they can’t touch it. The amount you can keep is $12,725.

Interviewer: That’s a fairly good amount to be able to retain.

Tanya: Right, it’s not insubstantial. For example, if you have a car that’s really worth $12,000 and you don’t own a home and you’re not using anything else, you could use that wild card exemption on top of the car so you can keep your car. It’s not a problem.

Interviewer: Yes, that makes sense.

Tanya: Again, these are liquidation values. These are practical values. These aren’t what’s this going to cost me to replace.

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  • Whippany Office
    575 Route 10 East
    Suite 1
    Whippany, New Jersey 07981
    Phone: 973-428-0800
    Fax: 973-428-0830
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    420 Lexington Ave.
    New York, New York 10170
    Phone: 646-213-9053
Testimonials
  • "Without Tanya and her time, the really unpleasant experience of getting divorced would have been even worse. They were able to settle the matter very quickly and helped me fit this into my tight schedule allowing me to leave to move abroad for my dissertation research on time without having to delay the trip because of the divorce. They also did all of it within my very tight budget. Thank you so much for your help and dedication to my legal matter!"  - AG

  • "Tanya and her Associates are outstanding! What I admire most about Tanya is her knowledge of the law with her keen negotiation skills to foster mediation. Her strategies efficiently resolve conflict leading to the resolution of cases. She and her team have an outstanding work ethic, know what data are needed, and get the job done. It is a pleasure to work with such wonderful professionals."  - Tara, Whippany

  • "I found Ms. Helfand's knowledge and tenacity most reassuring during the ordeal of my divorce. She was steadfast in her guidance and was very effective in her negotiations on my behalf. I would recommend her without a second thought."  -Jonathan

  • "Ms. Helfand was very professional and helpful with our bankruptcy case. Her advice was very useful and helped us make the proper decisions for our situation. In addition, she was very supportive during a very difficult time for us. Finally, she set very specific fee expectations and there were no surprises when it was completed. I would use her services again and would recommend her, without question."

  • "She is Incredible, very quick responding to the other party. Very professional and courteous. I highly recommend her. She has a great passion and love for every single case."

  • "Tanya and her team were very professional handling my divorce proceedings. She was very proactive in making the other attorney finally get the process moving forward. I would recommend her to anyone looking for legal services."  -Scott

  • "Ms. Helfand strategized & processed, both, my Divorce & Chapter 13 Bankruptcy. As both cases were emotionally and legally challenging, Ms. Helfand proved to be an empowering Mentor along the path to clarity for which I am truly grateful.I highly recommend her legal expertise to anyone who is seeking a confident, savvy & caring attorney to become at peace with self and any legal matters."  -Vas

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