Bankruptcy in New Jersey (2026): Exemptions & Means Test

Bankruptcy is a federal process, but the property you can keep and the income limits that shape Chapter 7 eligibility turn on state law. New Jersey is one of a minority of states that lets you choose between its own exemptions and the federal bankruptcy exemptions, and its state list is unusual in offering no general homestead exemption. One recent exception matters a great deal: under the New Jersey Veterans and Military Spouses Asset Protection Act (N.J.S.A. 2A:17-17.1 et seq., L.2025, c.326), the residences of a veteran, service member, or military spouse are exempt from forced sale without any limitation of value.

This guide is part of our Bankruptcy by State series. It is general legal information, not legal advice, and the dollar figures below change periodically, so confirm current amounts before you rely on them.

Does New Jersey use state or federal bankruptcy exemptions?

New Jersey is one of the states that did not opt out of the federal exemption scheme. Under 11 U.S.C. 522(b), each state may force its residents to use state exemptions, but New Jersey instead lets a filer choose. You may claim either the New Jersey exemptions (found mainly in N.J.S.A. Title 2A) or the federal exemptions in 11 U.S.C. 522(d). You must choose one full set; you cannot combine the most generous parts of each.

For most New Jersey filers, that choice is straightforward. The state exemptions are sparse and, critically, include no general homestead, while the federal list provides a homestead, a vehicle exemption, and a generous wildcard. As a result, the large majority of New Jersey consumer filers select the federal exemptions. A veteran, service member, or military spouse should run the comparison the other way, because for that group the state set now carries a residence exemption with no limit on value. To use the federal set, the residency rules in 11 U.S.C. 522(b)(3) generally require domicile in New Jersey for the 730 days before filing; otherwise an earlier state's exemptions may apply.

The New Jersey homestead gap and the federal homestead

Unlike most states, New Jersey provides no general state homestead exemption. For most filers there is no dollar amount of home equity protected under New Jersey's own statutes, and that is the single most important planning point for a New Jersey homeowner in bankruptcy. The exception, covered in the next section, is a veteran, service member, or military spouse.

Because the state offers nothing for a home in the ordinary case, a filer who needs to protect equity in a residence generally must choose the federal exemptions and rely on the federal homestead in 11 U.S.C. 522(d)(1). That amount is $31,575 as of April 1, 2025, and it is adjusted for inflation every three years, with the next adjustment scheduled for April 1, 2028. A married couple who jointly own their home and file together can each claim the federal homestead, which roughly doubles the protected equity to about $63,150. If home equity exceeds the available federal homestead, the excess is not protected, and a homeowner in that position often considers Chapter 13 instead. Confirm the current federal figure before relying on it.

The exception for veterans, service members, and military spouses

The New Jersey Veterans and Military Spouses Asset Protection Act, codified at N.J.S.A. 2A:17-17.1 through 2A:17-17.6 (L.2025, c.326), created the residence protection New Jersey had never had, but only for a defined group. Under N.J.S.A. 2A:17-17.4(a), the primary and secondary residences of a veteran, service member, or military spouse are exempt from levy, execution, attachment, or forced sale for the payment of debts, judgments, or other claims. Subsection (b) applies that exemption without a limitation of value for both residences, provided ownership of both properties is properly recorded with the county clerk. The exemption extends fully to a spouse who holds the property jointly and continues for a surviving military spouse who keeps ownership.

The Act defines the group broadly. A veteran is a person honorably discharged from any branch of the armed forces, including the National Guard and reserve components; a service member is a person currently serving in any branch, including the Guard and reserves; and a military spouse is the spouse or surviving spouse of either.

N.J.S.A. 2A:17-17.5 adds the personal-property protections the state list otherwise lacks. Retirement accounts, pensions, disability benefits, and veterans' benefits of that same group are exempt from creditor claims, and one motor vehicle per household is exempt up to a fair market value of $30,000.

Three limits matter before a filer counts on this. The residence and vehicle exemptions do not defeat mortgages or other voluntary liens, taxes or obligations owed to a federal, state, or local government entity, or judgments arising from the debtor's willful misconduct, fraud, or criminal activity. In bankruptcy, the exemption is available only to a filer who claims the New Jersey set under 11 U.S.C. 522(b)(3)(A) instead of the federal set, which means giving up the federal wildcard. And 11 U.S.C. 522(p) caps any state homestead exemption at $214,000 for a residence the debtor acquired within the 1,215 days before filing, so the unlimited state figure reaches its full value only for a longer-held home. Because the Act is recent, a filer in this group should confirm with a New Jersey bankruptcy attorney how trustees in the district are treating it.

Motor vehicle, wildcard, and personal property

Outside those veterans provisions, New Jersey's own exemptions are limited. The main protections are a general personal-property exemption of up to $1,000 in goods, chattels, stock, or interest in a business, which N.J.S.A. 2A:17-19 shields from execution, and a separate $1,000 exemption for household furniture and goods, which N.J.S.A. 2A:26-4 shields from attachment. The two are conventionally charted together even though their terms are not parallel. The general state list has no separate motor-vehicle exemption and no wildcard beyond these modest amounts. Wages are protected by New Jersey's wage-execution statutes: N.J.S.A. 2A:17-50 governs when a court may order a wage execution to issue and sets the $48-per-week threshold, while N.J.S.A. 2A:17-56 sets the limit itself at 10% of wages unless the debtor's income exceeds 250% of the poverty level for the family size, in which case the court may order a larger percentage. The federal garnishment cap applies as well, generally shielding the greater part of disposable earnings, with stronger protection for lower-income debtors.

The federal exemptions, by contrast, include a $5,025 motor-vehicle exemption (522(d)(2)), a household-goods exemption up to $16,850 in the aggregate, and a wildcard of $1,675 plus up to $15,800 of any unused homestead amount (522(d)(5)), all as of April 1, 2025. Because the federal set protects more for most filers, comparing the two systems is the central planning step in a New Jersey case. Federal nonbankruptcy protections such as Social Security and most ERISA-qualified retirement plans apply regardless of which set you choose.

The Chapter 7 means test in New Jersey

The means test screens who may file Chapter 7. The first step compares your household's average monthly income over the six months before filing, annualized, to the New Jersey median family income for your household size as published by the U.S. Trustee Program. If you are at or below the median, you generally pass. If you are above it, a second calculation of disposable income decides whether you can still file Chapter 7 or are steered toward Chapter 13.

For cases filed on or after April 1, 2026, the New Jersey median family income figures are:

Add $11,100 for each additional person beyond four. These figures apply only to cases filed on or after April 1, 2026, and the U.S. Trustee Program revises them about twice a year, so confirm the figures for your filing date.

Chapter 7 vs. Chapter 13 and the automatic stay

Chapter 7 is liquidation. A trustee may sell non-exempt property to pay creditors, and most remaining unsecured debt is discharged, usually within about four to six months. It suits filers with limited non-exempt assets and primarily unsecured debt.

Chapter 13 is reorganization. You keep your property and repay some or all of what you owe through a court-approved plan lasting three to five years. In New Jersey, where most filers have no state homestead, Chapter 13 is often the better path for a homeowner whose equity exceeds the federal homestead, because the plan lets the filer keep the home while repaying the value of the non-exempt equity over time, and it can cure a mortgage arrearage to stop a foreclosure.

Filing either chapter triggers the automatic stay under 11 U.S.C. 362, which immediately halts most collection efforts, including foreclosure sales, wage garnishment, repossession, and collection calls, while the case proceeds.

Where you file in New Jersey

New Jersey is a single federal judicial district, but the U.S. Bankruptcy Court for the District of New Jersey is organized into three vicinages with courthouses in Newark (northern counties), Trenton (central counties), and Camden (southern counties). You file in the vicinage that serves the county where you have lived for the greater part of the last 180 days. Federal law requires an approved credit-counseling course before you file and a debtor-education course before discharge.

What bankruptcy can and cannot do

Most unsecured debts, such as credit cards, medical bills, and personal loans, are dischargeable. Several categories generally are not, including most student loans (absent a separate showing of undue hardship), recent income taxes, domestic-support obligations like child support and alimony, and debts arising from fraud. Secured debts like a mortgage or car loan continue if you keep the collateral and keep paying. Because New Jersey has no general state homestead and the choice of exemption set drives what a homeowner keeps, many filers consult a licensed New Jersey bankruptcy attorney before deciding.