What Are the New Jersey Bankruptcy Exemptions?
5 minute read • Upsolve is a nonprofit that helps you get out of debt with education and free debt relief tools, like our bankruptcy filing tool. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool
Every state has its own set of bankruptcy exemptions. There is also a set of federal bankruptcy exemptions contained in the United States Bankruptcy Code. Several states, including New Jersey, allow residents to choose between taking the New Jersey bankruptcy exemptions and the federal exemptions. It’s important to note that you have to pick one set of exemptions and stick to it, you can’t pick and choose from both New Jersey exemptions and federal, rather go with the set that gives you the most protection. If you decide to go with the state exemptions you can also use the federal nonbankruptcy exemptions as a supplement, so long as you meet the qualifications.
Written by Attorney Eva Bacevice. Legally reviewed by Jonathan Petts
Updated April 2, 2025
What Are the New Jersey Bankruptcy Exemptions and Why Are They Important in Chapter 7 Bankruptcy?
Deciding to file for bankruptcy can feel overwhelming, especially when you’re worried about losing your property. One of the most common concerns in Chapter 7 bankruptcy is whether you’ll have to give up things you own. That’s a fair question—but in most cases, people are able to keep all of their property by using bankruptcy exemptions.
Exemptions are laws that protect certain types of property in bankruptcy. They’re meant to give you a fair chance at a fresh start, not leave you with nothing. In Chapter 7, your property technically becomes part of the bankruptcy estate, and the trustee can sell anything that isn't protected to pay back unsecured creditors. That might sound fair to creditors, but it wouldn’t be fair to you if it meant starting over with nothing.
That’s where exemptions come in. They help make sure you can keep the things you need to live and work—like your clothes, furniture, and maybe even your car or home. If you own more than the exemption laws protect, such as luxury or investment property, those items could still be sold. But for most people, exemptions cover everything they need to move forward.
Does New Jersey Allow Filers To Use Federal Bankruptcy Exemptions?
Yes. New Jersey allows residents to choose between taking the New Jersey bankruptcy exemptions and the federal bankruptcy exemptions.
You’ll need to choose one system or the other—you can’t mix and match between the two. Many people compare both options and go with the one that protects the most property based on what they own. If you choose the New Jersey exemptions, you may still be able to use certain federal nonbankruptcy exemptions as a supplement, depending on your situation.
If you’ve recently moved to New Jersey, things can get a bit more complicated. To use New Jersey’s exemptions, you generally must have lived in the state for at least two years before filing. This is known as the 730-day rule. If you haven’t been in New Jersey that long, you’ll need to look at where you lived during the majority of the six-month period that ended two and a half years before your bankruptcy filing. That earlier state’s exemption laws may apply instead.
Real Property: The New Jersey Homestead Exemption
New Jersey is unusual in that it doesn’t offer a homestead exemption to protect equity in your home during bankruptcy. This means homeowners in New Jersey don’t have a state-level exemption to shield their house, mobile home, or other residence from being sold in a Chapter 7 case.
However, there is one exception: if you own property with your spouse as tenants by the entirety, your spouse’s survivorship interest may be protected from certain creditors.
Because of the lack of a state homestead exemption, many New Jersey filers consider using the federal bankruptcy exemptions, which do include a homestead exemption.
As of April 1, 2025, the federal homestead exemption protects up to $31,575 in home equity—or $63,150 for married couples filing jointly. This also applies to mobile homes, co-ops, and burial plots. If you don’t use the full homestead exemption, up to $15,800 of the unused amount can be applied to protect other property through the federal wildcard exemption.
Personal Property Exemptions
In New Jersey for married couples filing jointly, each spouse can claim the full amount of the personal property exemptions, so long as they have an ownership interest in the property. The below New Jersey bankruptcy exemptions can all be found in the New Jersey Statutes.
Clothing is protected with no limit under New Jersey exemptions.
Household goods and furniture are exempt under the New Jersey exemptions up to $1,000. Federal exemptions for the same are included in the same section as clothing above.
Goods and chattels, shares of stock or interests in any corporation, and personal property of every kind (excluding clothing) are protected under New Jersey exemptions up to a combined value of $1,000.
Federal exemptions combine clothing along with animals, crops, appliances and furnishings, books, household goods, and musical instruments up to $800 per item, and up to $16,850 total.
Motor Vehicle Exemption
Just like with homestead, New Jersey doesn't offer an exemption for a motor vehicle. You could use your wildcard exemption (see below) of $1,000 toward equity in your car, but that would be your only option with the state exemptions.
Under federal exemptions, a New Jersey filer could protect up to $5,025 equity in a motor vehicle. Married couples filing jointly could each use the exemption on their separate cars if needed.
Wildcard Exemption
Filers using the New Jersey state exemptions can protect up to $1,000 in general personal property. Federal exemptions allow for $1,675 to be applied to any property, as well as the unused portion of homestead exemption up to $15,800.
Other New Jersey Exemptions
New Jersey state law offers protection for the below public benefits and pensions whether or not you are in a Chapter 7 bankruptcy. These exemptions include:
Public Benefits
Workers' compensation
Unemployment compensation. This is fully protected under federal exemptions as well, which covers public assistance, Social Security, veteran’s benefits, and unemployment compensation in full.
Old-age and permanent disability assistance.
Crime victims' compensation. Federal exemptions protect this in full as well.
Pensions
New Jersey offers specific pension protection, in full, to the following career industries:
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 exemptions also protect in full a trust containing personal property if it was created under federal tax law.
If you elect instead to use the federal exemptions you can exempt the following retirement savings accounts in full:
Tax-exempt retirement accounts, including 401(k)s, 403(b)s
Profit-sharing and money purchase plans
SEP and SIMPLE IRAs
Defined benefit plans
Whereas IRAS and Roth IRAs have a maximum limit under federal exemptions which can change. The threshold is high enough that it does not impact most filers. The amount protected currently is up to $1,711,975
Money Benefits
Certain property is untouchable by creditors. New Jersey protects the following money or benefits that you are entitled to up to the amounts stated:
New Jersey will protect 90% of earned but unpaid wages if your annual income is less than $7,500. The percentage decreases if the filer’s income is higher. There's additional protection for wages and allowances of military personnel.
New Jersey also offers protection for annuity contract proceeds up to $500 per month.
In New Jersey the below insurance benefits and/or proceeds are protected in full:
Health and disability benefits
Civil defense workers' disability, death, medical or hospital benefits
Life insurance proceeds, dividends, interest, loan, cash, or surrender value, if 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
For contrast, the federal exemptions protect the below insurance benefits and/or proceeds up to the amount state or in full:
Unmatured life insurance policy except for credit insurance
Life insurance policy with loan value up to $16,850
Disability, unemployment or illness benefits
Life insurance payments for a person you depended on, which you need for support
Filing Chapter 7 Bankruptcy?
If you’re thinking of filing bankruptcy in New Jersey and need legal advice, keep in mind that most bankruptcy attorneys offer a free consultation. This can be helpful to determine if you are on the right track for a debt relief solution that works for you. If Chapter 7 won’t protect the property you want to keep, you can look into Chapter 13 bankruptcy.
If it makes sense for you to file Chapter 7 bankruptcy but you can’t afford to hire a bankruptcy lawyer, you can check Upsolve’s screening tool to see if you qualify to use our free filing tool.
