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What is a bankruptcy exemption and how does it protect my possessions?

One thing that is a concern for anyone filing bankruptcy is whether a trustee will take away and sell their possessions.  This is because, if you are filing a chapter 7 bankruptcy, the trustee assigned to your case will be looking at your assets with an eye towards selling them in an effort to pay creditors. A sale of assets rarely happens in New Jersey, though, because the law provides for you to retain assets up to a certain value.

What Are the Exemptions?

This is done through "exemptions," which are provisions within the Bankruptcy Code (which are used in New Jersey bankruptcies) that protect those assets up to a certain value. Each debtor in a bankruptcy can use the full exemptions, which effectively doubles the maximum amounts for married couples applying exemptions to jointly owned property. Here are some examples of available exemptions:

Principal Residence (Homestead Exemption)                                         $22,975
Motor Vehicle (Applied only once by one debtor to one vehicle)            $3,675
Household Goods and Furnishings, Clothing                                         $12,250
Furs and Jewelry                                                                                    $1,550
Tools of trade (books & equipment)                                                       $2,300
Cash Value of Life Insurance Policy                                                       $12,250
Pain and Suffering Damages from Personal Injury Action                      $22,975
"Wildcard" Exemption (Can Be Applied to Anything)                              $11,487
Stock, business interests & personal belongings (other than clothing)  $1,000

There are more exemptions than these, but the above represent the most common ones applied.

So What Should I Do?

Ultimately, the answer to this question can only be given after an attorney has reviewed a list of your assets, determined their distressed sale value, and then applied these exemptions.  Often, a "liquidation analysis is done, as in the case of a home.  Although each case is different, statistics are on your side. In New Jersey, over 90% of chapter 7 bankruptcies do not involve assets being sold by the trustee.

If you live in South Jersey and are considering filing bankruptcy, call my office at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case.

If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

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