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

A:

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, though, because the law provides for you to retain assets up to a certain value.

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)                                         $21,625
Motor Vehicle (Applied only once by one debtor to one vehicle)            $3,450
Household Goods and Furnishings, Clothing                                         $11,525
Furs and Jewelry                                                                                    $1,450
Tools of trade (books & equipment)                                                       $2,175
Cash Value of Life Insurance Policy                                                       $11,525
Pain and Suffering Damages from Personal Injury Action                      $21,625
"Wildcard" Exemption (Can Be Applied to Anything)                              $10,825
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.  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.  But if you are thinking about filing, call and meet with me, so that I can determine if this is the case with you.

Have more questions about bankruptcy?  Get the answers to the most frequently asked questions by downloading my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.  It will give you the answers you need all in one place.  Then call me at 888-857-8418 or contact me through this site for an appointment for a free consultation to discuss your case.