Understanding New Jersey’s Bankruptcy Exemptions: What You Can Keep
- MaryBeth Schroeder
- Dec 23, 2025
- 4 min read
Filing for bankruptcy can be one of the most difficult financial decisions you’ll ever make. Yet for many New Jersey residents, it also represents a fresh start, an opportunity to regain control of finances and rebuild stability. One of the biggest concerns people have when considering bankruptcy is whether they will lose everything they own. The good news is that New Jersey law allows for bankruptcy exemptions, which protect certain assets from being seized or sold by creditors during the bankruptcy process.
This guide breaks down the key exemptions available under New Jersey law so you can better understand what you can keep if you file for bankruptcy.
What Are Bankruptcy Exemptions?
When you file for bankruptcy, your assets become part of the “bankruptcy estate.” This estate is used to repay your creditors but thanks to exemption laws, not everything you own is fair game. Exemptions identify specific categories of property that are legally protected from liquidation, allowing you to retain essential assets that you need for daily living or to rebuild financially.
In New Jersey, you can choose between New Jersey state exemptions and federal bankruptcy exemptions, but you cannot mix the two systems. Deciding which set of exemptions to use depends on your personal financial situation, the value of your assets, and your goals in the bankruptcy process.
New Jersey’s Key Bankruptcy Exemptions
New Jersey’s state exemptions are outlined under the New Jersey Statutes Annotated (N.J.S.A. 2A:17-19 et seq.). Here’s an overview of what you may be able to protect when you file for bankruptcy in New Jersey:
1. Homestead Exemption (Primary Residence)
New Jersey is one of the few states that does not have a specific homestead exemption under its state laws. This means your home’s equity is not automatically protected under state exemptions.
However, if you choose the federal exemptions, you can protect up to $27,900 (as of 2024) of equity in your primary residence. If you’re filing jointly with a spouse, that amount can double to $55,800.
If your home equity is higher than the exemption limit, it may be worth consulting a bankruptcy attorney to explore alternatives, such as filing under Chapter 13 instead of Chapter 7, which allows you to restructure debt and keep your property while making payments over time.
2. Motor Vehicle Exemption
Under New Jersey state law, you may protect up to $1,000 of equity in your car. If your vehicle is essential for work or family transportation, this exemption can be crucial.
If your car is worth significantly more, choosing the federal exemption system may allow you to protect up to $4,450 in vehicle equity, plus an additional “wildcard” exemption if applicable (more on that below).
3. Personal Property Exemption
New Jersey allows you to protect up to $1,000 in personal property, which can include items such as:
Furniture and household goods
Clothing
Appliances
Tools of your trade
If you file jointly with your spouse, each of you may claim this exemption separately, allowing up to $2,000 total protection.
Under the federal system, personal property exemptions are often higher, for instance, you can exempt up to $700 per item and $14,875 total in household goods.
4. Wages and Earnings
New Jersey protects a portion of your wages from garnishment or seizure. Typically, 75% of your disposable weekly earnings (or 30 times the federal minimum wage, whichever is greater) are exempt from creditor claims. This protection helps ensure you can continue to afford basic living expenses even during bankruptcy proceedings.
5. Retirement Accounts and Pensions
Both state and federal laws recognize the importance of preserving retirement savings.Under New Jersey law, qualified retirement plans, such as 401(k)s, IRAs, and government pensions, are generally fully exempt from bankruptcy. This means you can retain your retirement funds and continue to build a secure financial future.
6. Public Benefits and Insurance
Certain public benefits and insurance proceeds are exempt under New Jersey law, including:
Social Security benefits
Unemployment compensation
Workers’ compensation
Disability benefits
Life insurance proceeds payable to a dependent
These exemptions reflect the state’s policy of protecting individuals who depend on these benefits for survival.
7. Tools of the Trade
If you rely on specific tools or equipment to earn a living, you may exempt up to $1,000 worth of professional tools under New Jersey’s state law. This helps self-employed individuals, tradespeople, and professionals retain the essential assets needed to continue working after bankruptcy.
8. Wildcard Exemption
New Jersey’s state laws do not offer a wildcard exemption, but the federal system does.Under the federal exemptions, you can use a “wildcard” exemption of up to $1,475, plus up to $13,950 of any unused homestead exemption, to protect any property you choose. This flexibility is particularly useful if you have valuable assets that don’t fit neatly into other exemption categories.
Choosing Between State and Federal Exemptions
Deciding whether to use the New Jersey or federal exemption system is a crucial step in your bankruptcy filing. In general:
Use New Jersey exemptions if you have limited home equity and fewer high-value personal assets.
Use federal exemptions if you have significant home equity, valuable vehicles, or need the flexibility of the wildcard exemption.
Because the decision can dramatically impact what property you keep, consulting a bankruptcy attorney is essential before filing.
Final Thoughts: Protecting Your Future
Bankruptcy is not the end; it’s the beginning of your financial recovery. By understanding New Jersey’s exemption laws, you can navigate the process with confidence and preserve the assets most important to your family and livelihood. Whether you’re protecting your home, vehicle, or retirement savings, these exemptions provide a crucial safety net as you rebuild.
Ready to Take the Next Step?
If you’re considering filing for bankruptcy in New Jersey, the experienced legal team at The Law Office of MaryBeth Schroeder can guide you through every step. From evaluating your exemptions to representing you in court, our attorneys will help protect your assets and secure your financial future.
Schedule a consultation today to learn how we can help you regain control and move forward with confidence.