Federal Exemption Wildcard

If you have an item that has a lot of sentimental or actual value, you can possibly keep it even if you file for bankruptcy.  Federal exemptions are especially generous if you don’t own a home.  In New Jersey, filers have the option to use federal exemptions.  There is a federal wildcard exemption for $1,150.  A wildcard exemption allows you to keep an item as long as it is below the allotted exemption value.

What if you have a baseball card that’s worth $2000?  You can apply the wildcard exemption, but you need to find $850 more to fully exempt the baseball card.  If you don’t own a home, you are allotted an additional $10,825 in wildcard exemptions.  After applying this additional exemption, your prized baseball card is fully exempt.

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Overlooked Assets in a Bankruptcy Filing

Full disclosure is one of the most important themes in a bankruptcy filing.  Even if it seems unimportant, if it has any financial relation to you, it should be included in your filing.  Some examples include: forgotten bank accounts, tax refunds, marital settlements, rent security deposits, pawned property, rights as a beneficiary in a life insurance policy and legal claims that have been filed against a 3rd party.

The bankruptcy trustee will be interested in determining whether any of these are non-exempt.  Failure to disclose such assets may lead to a delay in the bankruptcy process or even a denial if it is found that such assets were purposefully hidden.

The Bankruptcy Trustee

A bankruptcy trustee is appointed to represent the interests of creditors in a bankruptcy case.  He or she reviews the petition filing’s schedules, documents and items that are claimed exempt to make sure everything looks proper and that there is no abuse.  If there items that are nonexempt, the trustee will attempt to sell it in order to pay back unsecured debtors.  If the costs of selling an item outweigh the value of the item, then the trustee may allow the bankruptcy petitioner to just keep the item.

The trustee will be present at the 341(a) meeting of creditors.  In reality, the creditors rarely show up in most cases because a bankruptcy petitioner will not have any assets.  The trustee will usually just ask the petitioner to see a government issued ID to confirm the petitioner’s identity, a Social Security Card, the latest tax return, and ask basic questions such as confirming the numbers on the schedules in the bankruptcy filing.  The meeting is usually 5-10 minutes.

Bankruptcy State Exemptions

An exemption allows a debtor to keep some property after a Chapter 7 bankruptcy filing, up to a certain value.  Some states allow a filer to use their state’s exemptions OR Federal exemptions.  New Jersey is one of them.  You can’t, however, mix and match exemptions from the state and exemptions from the Federal.
State exemptions can vary widely from state to state.  For example, in Florida, your primary residential home is 100% exempt, meaning that you will probably keep your home in a Chapter 7 filing even if you have paid for it completely.  In New Jersey, however, there is no state homestead exemption.  As mentioned above, New Jersey filers have the option of filing under Federal exemptions, which allows up to $20,200 to be kept after the sale of a home.  That said, you can’t suddenly move to a new state to immediately take advantage of their homestead exemption.  The home must have been purchased more than 1215 days before the bankruptcy filing.