How Can I Get a Bankruptcy Exemption?


Bankruptcy Explained

Bankruptcy can be a tool that gives people who cannot afford to pay their debts a fresh financial start by temporarily or permanently preventing creditors from collecting debts and either wiping debts clean or restructuring debts to make them manageable and affordable. However, bankruptcy is a tool of last resort because it is a negative mark on your credit report that lasts for 10 years, which can make it difficult for you to acquire credit, buy a home, or even find a job.

What Can Bankruptcy Do for Me?

Initially, filing for bankruptcy can temporarily stop creditors’ efforts to collect a debt from you, including pausing foreclosure of a home, repossession of a car or other property, stopping garnishment, and precluding debt collection letters and calls. Thereafter, the bankruptcy court can help you to restructure your debts to make them more manageable for you to pay off. Or it may wipe out your debts completely by requiring creditors to take cents on the dollar for your debts; in exchange, you may be required to liquidate various assets to generate as much cash as possible for your creditors.

What Bankruptcy Doesn’t Do

Bankruptcy usually cannot eliminate “secured” debts, such as home mortgages or car notes, although restructuring of such debts may be possible. Certain other kinds of debts cannot be discharged, including:

  • Debts incurred within 180 days of the bankruptcy filing
  • Child support
  • Alimony
  • Court fines and penalties
  • Certain taxes incurred within the last three years
  • Debts not listed on the bankruptcy petition
  • Loans obtained through fraud
  • Many types of student loans owed to a school or government
  • Debts incurred after filing of the bankruptcy petition

How Much Debt Do I Need to Have to File for Bankruptcy

Although there is no official minimum amount of debt you need to have to be eligible to file for bankruptcy, in practice most people who file for bankruptcy have at least tens of thousands of dollars in debt. Any smaller amount is generally not worth the hit to your credit rating, and the bankruptcy court may not be convinced that you are unable to afford such a smaller debt load.

The Different Types of Bankruptcy

Individuals can file for one of two types of bankruptcy:

  • Chapter 7: Debts are discharged, as the debtor’s property is forfeited to a bankruptcy trustee who will liquidate, or sell off, certain assets to satisfy as much of the outstanding debt as possible. However, certain property is exempt from being seized or sold off by the trustee. Property subject to a security interest can be seized, but only to satisfy the debt secured by that property.
  • Chapter 13: Debts are “reorganized” into a repayment or debt adjustment plan. The debtor files a plan with the court, proposing how to pay off his or her debts over the next several years. The debtor can keep his or her property, subject to a security interest, so long as he or she complies with the repayment plan ultimately approved by the court. 

Exempt Property in Chapter 7 Bankruptcy

Under a Chapter 7 bankruptcy, you are entitled to keep any property that is exempt from creditors’ claims under the federal Bankruptcy Code or under state law. The federal exemptions include: 

  • $16,500 in home equity
  • $2,575 in equity in a vehicle
  • $425 per household item, up to a total of $8,625
  • $1,625 in job-related items
  • $850 in any item of property, plus any unused exemption in your home, up to a maximum of $8,075
  • Your social security, unemployment, VA, welfare, and pension benefits, regardless of the amount

These amounts are doubled if a married couple files jointly for bankruptcy. 

Contact a Clifton Bankruptcy Attorney for a Consultation About Bankruptcy Exemptions in New Jersey Today

If you are struggling with debt, you may need a fresh start financially. An experienced bankruptcy and debt relief attorney can help you explore your options and determine the best course of action for you, your family, and/or your business. The experienced New Jersey bankruptcy lawyers at the law firm of Silverman and Roedel, LLC understand the nuances of New Jersey and federal bankruptcy laws, so we can help you protect your interests. Call us anytime at (973) 772-6411 or fill out the online contact form to schedule a confidential consultation. We have an office conveniently located at 1187 Main Ave., #2C, Clifton, NJ 07011.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.