New Jersey Bankruptcy Exemptions: What You Can Keep in Chapter 7
New Jersey allows you to choose between state and federal bankruptcy exemptions. State exemptions lack homestead and vehicle protection, so most filers benefit from federal exemptions. Compare both systems carefully to maximize your property protection in Chapter 7 bankruptcy.
Get Free ConsultationEvery state has its own bankruptcy exemptions. The federal government provides another set in the United States Bankruptcy Code. New Jersey allows you to choose between state and federal exemptions. You must pick one set and stick with it. You cannot mix and match. Choose the set that protects your property best. If you select state exemptions, you can supplement with federal nonbankruptcy exemptions.
What Are Bankruptcy Exemptions and Why Do They Matter?
Filing bankruptcy can feel overwhelming when you worry about losing property. Most people keep everything by using bankruptcy exemptions correctly. Exemptions protect certain property types during bankruptcy. They give you a fair shot at a fresh start.
Maximize Your Property Protection in Chapter 7
Choosing the wrong exemptions could cost you thousands in protected property. A bankruptcy attorney can compare state and federal exemptions to keep more of what you own.
Speak With Attorney NowIn Chapter 7, your property becomes part of the bankruptcy estate. The trustee can sell unprotected items to pay unsecured creditors. Exemptions prevent you from losing everything you need to live and work.
You can usually keep clothes, furniture, and often your car or home. The trustee might sell luxury items or investment property. For most people, exemptions cover essential belongings. Speak with a bankruptcy attorney for free to understand which exemptions protect your property best.
Can You Use Federal Exemptions in New Jersey?
Yes. New Jersey lets residents choose between state and federal bankruptcy exemptions. You pick one system or the other. Many people compare both options first. They select whichever protects more property based on what they own.
If you choose New Jersey exemptions, you can still use certain federal nonbankruptcy exemptions. Your situation determines eligibility.
Recent moves complicate matters. You must live in New Jersey for two years before filing to use state exemptions. That’s called the 730-day rule. If you haven’t been in New Jersey that long, different rules apply. Look at where you lived during most of the six months ending two and a half years before filing. That state’s exemption laws may apply instead.
Real Property: New Jersey Has No Homestead Exemption
New Jersey offers no homestead exemption. Homeowners cannot protect equity in their home through state law. The state won’t shield your house, mobile home, or residence from Chapter 7 sale.
One exception exists. If you own property with your spouse as tenants by the entirety, your spouse’s survivorship interest may be protected from certain creditors.
Many New Jersey filers choose federal bankruptcy exemptions because of this gap. As of April 1, 2025, federal exemptions protect up to $31,575 in home equity. Married couples filing jointly can protect $63,150. This covers mobile homes, co-ops, and burial plots too.
If you don’t use the full homestead exemption, you can apply up to $15,800 elsewhere. Use it through the federal wildcard exemption to protect other property.
Personal Property Exemptions
Married couples filing jointly can each claim full personal property exemptions. Both spouses must have ownership interest in the property.
Clothing and Household Goods
New Jersey protects clothing with no limit. Household goods and furniture get protection up to $1,000. Federal exemptions combine clothing with animals, crops, appliances, furnishings, books, and musical instruments. You can protect up to $800 per item and $16,850 total.
General Personal Property
New Jersey exempts goods, chattels, stock shares, corporate interests, and personal property. Clothing is excluded from this category. Combined value protection reaches $1,000.
Motor Vehicle Exemption
New Jersey offers no motor vehicle exemption. You could apply your $1,000 wildcard exemption toward car equity. That’s your only option with state exemptions.
Federal exemptions let New Jersey filers protect up to $5,025 equity in one vehicle. Married couples filing jointly can each protect equity in separate cars.
Wildcard Exemption
New Jersey state exemptions protect up to $1,000 in general personal property. Federal exemptions allow $1,675 for any property. You can also use unused homestead exemption amounts up to $15,800.
Public Benefits and Pensions
New Jersey law protects these public benefits whether you’re in bankruptcy or not.
Public Benefits
- Workers’ compensation
- Unemployment compensation (federal exemptions also protect this fully)
- Old-age and permanent disability assistance
- Crime victims’ compensation (federal exemptions protect this fully too)
Federal exemptions fully protect public assistance, Social Security, veteran’s benefits, and unemployment compensation.
Pensions
New Jersey fully protects pensions for these career fields:
- Civil defense workers
- Teachers
- School district employees
- Judges
- Prison employees
- Alcohol beverage control officers
- County employees
- City workers’ ERISA-qualified benefits
- Municipal employees
- Public employees
- Police officers, firefighters, and traffic officers
- City boards of health employees
- Street and water department employees
- State police
New Jersey also fully protects trusts containing personal property created under federal tax law.
Federal Retirement Protections
If you choose federal exemptions, you can fully exempt these retirement accounts:
- Tax-exempt retirement accounts, including 401(k)s and 403(b)s
- Profit-sharing and money purchase plans
- SEP and SIMPLE IRAs
- Defined benefit plans
IRAs and Roth IRAs have a maximum limit under federal exemptions. The current protection reaches $1,711,975. That’s high enough to cover most filers.
Money Benefits and Insurance
Wages and Military Benefits
New Jersey protects 90% of earned but unpaid wages if your annual income is less than $7,500. The percentage decreases with higher income. Military personnel wages and allowances get additional protection.
Annuity contract proceeds receive protection up to $500 per month.
Insurance Benefits and Proceeds
New Jersey fully protects these insurance benefits:
- Health and disability benefits
- Civil defense workers’ disability, death, medical or hospital benefits
- Life insurance proceeds, dividends, interest, loan, cash, or surrender value (if you’re not the insured)
- Group life or health policy or proceeds
- Life insurance proceeds if policy prohibits use to pay creditors
- Military member disability or death benefits
- Fraternal benefit society benefits
Federal Insurance Protections
Federal exemptions protect these insurance benefits:
- Unmatured life insurance policy (except credit insurance)
- Life insurance policy with loan value up to $16,850
- Disability, unemployment or illness benefits (fully protected)
- Life insurance payments for someone you depended on (if needed for support)
Choosing the Right Exemptions
Compare both exemption systems carefully before filing. State exemptions offer better protection for some property types. Federal exemptions cover homestead, vehicles, and broader personal property categories.
Most New Jersey filers benefit from federal exemptions because of the homestead protection. Your specific situation determines the best choice. Consider what you own and which system protects more of it. Speak with a bankruptcy attorney for free to determine which exemption set maximizes your protection.