New Jersey bankruptcy laws combine federal procedure with state-specific asset protections. Cases are filed in the U.S. Bankruptcy Court for the District of New Jersey, most consumers choose between Chapter 7 (liquidation) and Chapter 13 (repayment plan), and because New Jersey has not opted out of the federal exemption system, you get to pick which set of exemptions protects your property.
Chapter 7 or Chapter 13
Chapter 7 is the faster, cleaner option. A trustee reviews your assets, sells anything not covered by exemptions, and the court discharges most remaining unsecured debts such as credit cards, medical bills, and personal loans. Cases usually close in about four months.1United States Courts. Chapter 7 – Bankruptcy Basics Most consumer Chapter 7 cases are “no-asset” cases, meaning the trustee finds nothing worth selling because everything falls within the exemption limits.
Chapter 13 lets you keep your property and pay back a portion of what you owe through a court-supervised plan running three to five years. It is the usual path if you have fallen behind on a mortgage and want to catch up without losing the house, or if your income is too high to qualify for Chapter 7. Your monthly payment is set by your disposable income, and a standing trustee distributes the money to creditors.2United States Courts. Chapter 13 – Bankruptcy Basics
Chapter 13 also has debt ceilings. You must owe less than $526,700 in unsecured debt and less than $1,580,125 in secured debt to qualify.2United States Courts. Chapter 13 – Bankruptcy Basics Those limits adjust periodically.
Who Qualifies for Chapter 7
Not everyone can file Chapter 7. The means test compares your household’s average monthly income over the six months before filing to the median income for a New Jersey family of the same size. Fall below the median and you pass automatically. Current New Jersey median figures:3U.S. Trustee Program. Census Bureau Median Family Income By Family Size
- One earner: $84,938
- Two people: $104,136
- Three people: $133,620
- Four people: $163,817
- Each additional person: add $11,100
Above the median, a second calculation kicks in. The court subtracts standardized living expenses (based on IRS Collection Financial Standards, with housing and transportation set at the county level) from your income to see what you have left over each month. If that remainder times 60 hits $10,275 or more (or 25% of your unsecured debts, whichever is greater), the court presumes abuse and generally pushes you toward Chapter 13. At $17,150, the presumption is automatic regardless of debt level.4Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13 The logic is simple: if you can afford to repay a meaningful share of what you owe, you don’t get to liquidate.
What You Keep: State or Federal Exemptions
Exemptions decide which property survives the case. New Jersey has not opted out of the federal system, so you choose between the state list under N.J.S.A. 2A:17-19 and the federal list under 11 U.S.C. ยง 522(d). You pick one system and stay in it. No mixing.
The State List
New Jersey’s state exemptions are thin. The main personal property provision covers all your clothing plus up to $1,000 in other personal property such as household goods and furniture.5Justia Law. New Jersey Code 2A-17-19 – Amount; Exceptions There is no state homestead exemption, which is why many New Jersey homeowners look to the federal list instead.
Where the state list is strong is retirement and benefits. Public employee pensions are broadly protected, including those for teachers, police officers, firefighters, municipal employees, and state employees. Trusts created under federal tax law are also protected, which covers 401(k) plans, IRAs, Roth IRAs, and 529 accounts. Disability benefits, unemployment compensation, workers’ compensation, and certain life insurance proceeds are covered as well.
The Federal List
The federal list gives homeowners a homestead exemption of $31,575 per filer, applied to equity in your primary residence. If you don’t own a home or your home equity is below the full homestead amount, you can shift the unused portion into a wildcard exemption. The wildcard is worth up to $1,675 plus $15,800 of unused homestead, for a maximum of $17,475 that you can apply to any property.6Office of the Law Revision Counsel. 11 USC 522 – Exemptions
Retirement protection under the federal list is generous. Employer-sponsored plans like 401(k)s and traditional pensions receive unlimited protection. Traditional and Roth IRAs are protected up to $1,711,975 per person. SEP and SIMPLE IRAs are protected without a cap. Rollover IRAs from qualified employer plans keep unlimited protection so long as you haven’t commingled them with regular IRA contributions.6Office of the Law Revision Counsel. 11 USC 522 – Exemptions
Picking Between Them
The right list is the one that saves more of your property. A homeowner with meaningful equity almost always leans federal. A renter with a large public employee pension might come out ahead on the state list. Run the numbers under both before you file. Getting this wrong can cost you assets you thought were safe.
Debts Bankruptcy Won’t Erase
Some debts survive both Chapter 7 and Chapter 13, and the list catches many filers off guard.7Office of the Law Revision Counsel. 11 USC 523 – Exceptions to Discharge
- Child support, alimony, and other domestic support obligations.
- Government-backed and qualified private student loans, unless you can prove “undue hardship,” which is a high bar.
- Income tax debts from returns due within the past three years, taxes assessed within the past 240 days, and taxes tied to unfiled or fraudulent returns.
- Debts obtained through fraud, false pretenses, or misrepresentation.
- Debts arising from death or injury caused by driving while intoxicated.
- Court-imposed fines, criminal restitution, and other penalties owed to government agencies.
- Debts to creditors you left off your filing who did not otherwise learn about the case.
A creditor who believes a specific debt fits one of these categories can file an adversary proceeding inside the bankruptcy case asking the court to rule that particular debt nondischargeable. Fraud and willful injury allegations are the common ones. If the creditor prevails, that debt survives while your qualifying debts still get discharged.
Filing in New Jersey
The District of New Jersey has courthouses in Newark, Trenton, and Camden, and you file at the one that serves your county.8United States Bankruptcy Court District of New Jersey. United States Bankruptcy Court District of New Jersey Filing fees are $338 for Chapter 7 and $313 for Chapter 13.9United States Bankruptcy Court. Court Fees If you can’t pay upfront, you can apply to pay in up to four installments over 120 days by submitting at least 25% with the petition. Chapter 7 filers whose income is below 150% of the federal poverty line and who cannot pay in installments can also apply for a full fee waiver.10United States Bankruptcy Court. Determine How You Will Pay Your Filing Fee
Required Courses
Federal law requires two courses. The first is a credit counseling briefing completed within 180 days before you file, covering budgeting and alternatives to bankruptcy. It can be done online, by phone, or in person, but only through an agency approved by the U.S. Trustee for the District of New Jersey.11Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor Approved providers are listed on the U.S. Trustee Program’s website.12United States Department of Justice. List of Credit Counseling Agencies Approved Pursuant to 11 USC 111
The second course, debtor education, happens after you file. In Chapter 7, the certificate must be filed within 60 days after your meeting of creditors. In Chapter 13, it has to be done before your final plan payment. Skip either course and the court will not grant a discharge.13Office of the Law Revision Counsel. 11 USC 727 – Discharge Each course typically runs $20 to $75.
What to Gather
Before you touch the forms, pull together:
- Pay stubs from the six months before your filing date, for the means test.
- Federal tax returns from the two most recent years.
- A complete list of debts with creditor names, addresses, account numbers, and balances.
- An inventory of all your assets: real estate, vehicles, bank accounts, investments, personal property, and anything else of value.
- Monthly expense records for housing, utilities, food, transportation, insurance, and other regular costs.
The main form is the Voluntary Petition for Individuals (Official Form 101), along with Schedules A through J covering real property, personal assets, income, expenses, and executory contracts.14United States Courts. Voluntary Petition for Individuals Filing for Bankruptcy Every figure on those schedules is a statement made under penalty of perjury.
After You File
The moment your petition hits the docket, an automatic stay takes effect. This federal injunction halts most collection activity: lawsuits, wage garnishments, creditor phone calls, foreclosures, and repossessions all stop.15Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The stay isn’t total. Criminal proceedings continue. Domestic support collections from property outside the bankruptcy estate aren’t blocked. The IRS can still audit you, send deficiency notices, and assess taxes. Family court cases for child custody, paternity, and domestic violence go forward normally. Secured creditors whose collateral is losing value can also ask the court to lift the stay for their specific debt.
Three to six weeks after filing, the court schedules a meeting of creditors, known as the 341 meeting. No judge attends. Your trustee asks you questions under oath about your finances, assets, and the accuracy of your schedules. Creditors are invited but rarely show up in consumer cases.16United States Department of Justice. Section 341 Meeting of Creditors In a Chapter 7, if no objections come in and you’ve finished the debtor education course, the court usually enters a discharge order about 60 days after the meeting.
Life After the Case
A Chapter 7 stays on your credit report for 10 years from the filing date. A Chapter 13 stays for seven. The hit to your score is worst in the first two years and eases from there. Rebuilding usually starts with a secured credit card, where a deposit sets your limit; consistent on-time payments and low balances rebuild the payment history that scoring models care about. Becoming an authorized user on a family member’s account can also speed things up.
Waiting Periods for a Second Case
If a prior bankruptcy didn’t fix the underlying problem, the timing rules matter. After a Chapter 7 discharge, you must wait eight years for another Chapter 7 discharge and four years for a Chapter 13 discharge.13Office of the Law Revision Counsel. 11 USC 727 – Discharge These periods run from filing date to filing date, not from the discharge date. You can file a new case sooner, but the court won’t grant a discharge until the clock runs out.