The New Jersey Motor Vehicle Exemption in a Chapter 7 Bankruptcy

When you seek protection in bankruptcy under Chapter 7, the law allows you to permanently discharge certain debts in exchange for the sale of non-exempt assets. As a general rule, you can’t discharge student loan, tax and family law arrearages. In addition, you can choose either the New Jersey state exemption or the federal exemption, and you’ll be able to keep certain property.

Choosing the Right Exemption for Your Motor Vehicle

The state exemption in New Jersey allows you to keep some up to $1,000 of equity in your car, van, truck or motorcycle. If your equity in the vehicle is less than $1,000, the trustee cannot take your car and sell it. However, if you have more than $1,000 in equity, the trustee will likely choose to take your car, sell it and give you the $1,000 exemption, and use any additional proceeds to repay creditors. In New Jersey, if you file a joint personal bankruptcy protection, you can double that exemption to $2,000.

If, instead, you opt to use the federal exemption amount, you can protect up to $3,775 of the equity in your motor vehicle.

Determining the Equity in Your Vehicle

The equity in your vehicle is essentially that amount you would personally receive and keep if you sold the vehicle and satisfied any debts related to the vehicle. If you have paid off the loan on the vehicle or there’s no debt, the equity in the vehicle will be its fair market value (usually calculated using the blue book value). If there’s any amount remaining on your motor vehicle loan, the equity will typically be the fair market value minus any amount still owed.

It’s important to understand that it’s the equity in your vehicle that counts, not the fair market value. Accordingly, you could be driving an expensive vehicle, but if the amount you owe is more than you could sell it for, you have no equity and the bankruptcy trustee won’t be interested in it.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

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