What Happens to Your Property in a Chapter 7 Bankruptcy in New Jersey?
Filing Chapter 7 bankruptcy in New Jersey can offer powerful debt relief—but it also comes with rules about what happens to your property. When you file for bankruptcy, everything you own on that date (and certain assets received within six months after filing) becomes part of your bankruptcy estate. The bankruptcy trustee may sell any nonexempt assets to repay your creditors—unless those assets are protected by New Jersey bankruptcy exemptions.
What Is Nonexempt Property in Chapter 7 Bankruptcy?
While most people filing Chapter 7 bankruptcy in NJ can protect their property through state or federal exemptions, any nonexempt property may be sold by the trustee. This can include:
- Valuable collectibles or luxury items
- Second vehicles or vacation homes
- Recent payments to creditors before filing bankruptcy
Yes, even payments you made toward debts in the weeks leading up to your bankruptcy can be scrutinized—and potentially reversed—under what’s known as the clawback provision.
Understanding the Clawback Provision in New Jersey Bankruptcy Cases
Bankruptcy trustees have the power to "claw back" certain financial transactions made before filing bankruptcy in New Jersey. The purpose is to prevent favoritism or fraudulent attempts to hide money or assets from creditors. There are two major types of clawbacks:
- Preferential Transfers
A preference occurs when you pay one creditor more than others shortly before filing. These payments are considered unfair to your other creditors and can be reversed by the trustee. Examples include:
- Payments of over $600 to a regular creditor in the 90 days before filing
- Payments to insiders (family members, friends, business partners) within one year of filing
The trustee can claw back these payments and redistribute the funds fairly among all your creditors.
- Fraudulent Transfers
A fraudulent transfer occurs when you try to hide assets—often by gifting or selling them for less than fair market value. For example:
- Gifting a vehicle to a relative before filing
- Selling property below value to protect it from creditors
If the trustee believes the transfer was made to defraud creditors, they can reverse the transaction and recover the property for the bankruptcy estate. Worse, if the court finds that you acted in bad faith, your entire case could be dismissed.
Why You Need a Bankruptcy Attorney in New Jersey
Navigating Chapter 7 bankruptcy in New Jersey can be complex, especially when dealing with clawbacks, preferences, and fraudulent transfers. An experience New Jersey bankruptcy attorney can:
- Help you identify and protect exempt property
- Guide you on what payments or transfers to avoid before filing
- Ensure full compliance with New Jersey bankruptcy laws
- Represent your interests before the trustee and bankruptcy court
Contact Simon Law Group – Experienced Chapter 7 Bankruptcy Lawyers in New Jersey
At Simon Law Group, our experienced bankruptcy attorneys in New Jersey help clients reduce debt, protect their assets, and move forward with confidence. Whether you’re facing wage garnishment, collection lawsuits, or overwhelming credit card debt, we can help you determine if Chapter 7 bankruptcy is right for you.
📞 Call today 800-709-1131 to schedule a free consultation and get started on your path to financial relief. You can also text us in the box below.
