How Does Bankruptcy Work to Help Individuals and Businesses in Debt?
Monmouth County Lawyer Explains Bankruptcy Exemptions and Protections in New Jersey
The Bankruptcy Code offers a number of protections for individuals, business owners and married couples struggling with debt. Many people want to know what protections and bankruptcy exemptions are offered to debtors in the bankruptcy process.
The first protection offered debtors occurs immediately upon filing a bankruptcy petition. Known as the automatic stay, this is a court order that tells all creditors they must stay away: no calls, no letters, no harassment and an immediate stop to foreclosure, repossession and collection actions. Thus, debtors have time to work with their bankruptcy attorney to decide the best path to move forward.
Another main protection offered by bankruptcy is the use of the New Jersey bankruptcy exemptions. Federal and NJ bankruptcy laws allow a person filing bankruptcy to exempt a certain amount of property. This means the property will then not be part of the bankruptcy estate and cannot be taken away from debtors to pay creditors.
What are the New Jersey Bankruptcy Exemptions?
Like all states, New Jersey has its own list of property that is exempt from the bankruptcy estate. However, based on their unique situation, New Jersey filers may choose between these New Jersey exemptions and the exemptions allowed under federal law. The bankruptcy exemptions for New Jersey allow you to keep:
- $1,000 in household furnishings and personal property
- Up to $500 in annuity payment per month
- Life insurance policy
- All clothing
- Prescription health aids
- Benefits, including: Social security, unemployment, public, veterans’, disability, workers’ comp
- Alimony (spousal maintenance) from a divorce
- Most employee stock plans, pensions, annuities
- Proceeds from wrongful death or personal injury lawsuits
- Cemetery burial plot
- Retirement funds and pensions
How are the Federal Bankruptcy Exemptions Different?
Everyone filing bankruptcy in New Jersey can use the federal bankruptcy exemptions instead of the state exemptions. However, you cannot use both. Like the New Jersey bankruptcy exemptions, the federal rules also allow you to keep a certain amount of personal property and benefits. The federal exemptions
The biggest difference between the state and federal exemptions is that the federal rules allow also you to keep up to $23,675 of equity in your house (the homestead exemption) and $3,775 of equity in your motor vehicle. Therefore, the federal exemptions may be more beneficial than New Jersey’s for those wishing to save their house and car.
What are Additional Protections Offered by Federal or NJ Bankruptcy Laws?
In addition to the automatic stay and the New Jersey bankruptcy exemptions, a main protection of the Bankruptcy Code under both Chapter 7 bankruptcy and Chapter 13 bankruptcy is the debt discharge. At the completion of either chapter of bankruptcy, the court will likely discharge most unsecured debt, including credit cards, medical bills and more. Therefore, the debtor will no longer have the legal obligation to pay such debt after bankruptcy.
In Chapter 13 bankruptcy, a person also may have the option to remove secondary mortgages from their underwater properties to turn them into unsecured loans. This means that at the completion of the Chapter 13 payment plan, these secondary mortgages will likely be discharged, as well.
Questions on How Bankruptcy Works? Talk to Our New Jersey Debt Relief Law Firm
If you have questions about the protections a bankruptcy filing could provide for you or your business, then reach out to our New Jersey bankruptcy lawyers. We offer free initial consultations with no obligation to families and companies struggling with overwhelming debt.
For effective legal representation in Ocean, Monmouth or Middlesex counties in New Jersey, contact our Manalapan bankruptcy law firm.