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New Jersey Bankruptcy Lawyer Explains The Amount Protected In A Bank Account In A Chapter 7

How much money can a person keep in their bank account at the filing of a chapter 7?

This depends on the amount of exemptions that are available to apply towards the bank account funds. The federal exemptions that may be applied towards bank account funds are called the wildcard exemptions, under U.S.C., section 522 (d) (5). Each person filing is permitted to apply $1,150.00 towards any property, plus $10,825.00 of the unused portion of their allowable $21,625.00 exemption (homestead exemption). The homestead exemption is applied towards the debtor’s residence.

This means that the most a person can keep in a non-pension like bank account at the time of the filing is $11,975.  A person may need to apply some or all of their homestead exemption. The homestead exemption may be required to save and protect the sale of their house from the trustee. The debtor is permitted to use only a portion of their homestead exemption, as follows:

Value of Home:    $275,000

Mortgage Payoff: $230,000

Difference:            $45,000.00

10% Cost of Sale:  $27,500.00

Difference:             $17,500.00

In the example above, the debtor will use $17,500.00 of his homestead exemption. This results in allowing only $4,125.00 of the unused portion of the homestead exemption, plus $1,150.00, for a total bank account exemption of $5,275.00. This means that the debtor may keep only $5,275.00, in the bank account, with the balance to be paid to the trustee.

Please note that the amount of the federal exemptions continuously change over the years. Also, a debtor may wish to apply a portion of his wildcard exemptions to property other than the bank account. Additionally, the amount and property protected may change based on numerous factors, including the filing of a joint bankruptcy case.

If you are considering a New Jersey chapter 7 bankruptcy, I can be contacted at 1 (866) 503-5655 with any further questions you might have concerning bankruptcy protection.



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