Is My Property, Including My Home, Exempt Under New Jersey Bankruptcy Law?
New Jersey has one of the most limited exemptions in the entire country. It is essentially a $3,000 general exemption and there is no specific exemption for anything to do with real estate or other property. For that reason, your home is not exempt under New Jersey bankruptcy law.
What If The Exemption Doesn’t Cover The Entire Value Of My Property?
The issue of excess equity in real estate after application of a federal bankruptcy exemption, which is $25,150 for a single person or $50,300 for a joint case, arises with some frequency. Trustees will require what is known as comparative market analysis, which is generally a realtor’s opinion of value, to submit with the documents prior to the creditors’ meeting. The analysis that a trustee undertakes is similar to reviewing if after the projected cost of sale, there still would remain equity after crediting a full exemption to the Debtor in the analysis. A trustee will account for the amount of secured debt against the property.
If an individual has equity well above the exemption and that is not eliminated after application of the hypothetical costs of sale, it may be more worthwhile to consider a Chapter 13 filing. In a “wage earners” Chapter 13 Plan the creditors would receive the value of that excess equity through the Chapter 13 plan. In other circumstances, Chapter 7 debtors can reach a settlement with the Chapter 7 trustee to pay some of the excess equity to that trustee. I’ve had clients that have utilized retirement accounts or financial assistance from third parties to settle with a trustee when there the issue of excess equity over the bankruptcy exemption arises.
What Is The Difference Between The Federal Exemption And The New Jersey Exemption? Do I Get To Choose Which Exemption Applies To My Bankruptcy?
Nearly all debtors in New Jersey claim the federal exemptions, which have a standard allowance for personal property and equity in real estate. Other major exemptions include personal injury awards, life insurance, and household goods up to specific limitations. An individual who claims a New Jersey exemption only covers a nominal amount of their property. It is almost never claimed. There are circumstances that involve some insurance issues which might lead someone to claim the New Jersey exemption but it is a rare occurrence.
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