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July 14, 2022 Collections

What Assets are Protected From Creditors in New Jersey?

When your business is attempting to collect from a debtor in New Jersey, it is important to understand that certain assets are protected from creditors in the state in various circumstances. The types of assets that are protected from creditors will depend in part on whether you have obtained a judgment against the debtor, and whether the debtor has filed for bankruptcy. 

Even when you have won a judgment against a debtor and before a debtor has filed for bankruptcy, there are limitations to collection efforts and judgment enforcement actions. The statute of limitations will also impact whether some or all assets of a debtor are protected from a creditor in New Jersey. When you are attempting to collect from a debtor, it is important to seek advice from an experienced New Jersey collections attorney who can assist your business. In the meantime, consider some of the following information.

Certain Assets May Be Protected After a Judgment

For most creditors, it is necessary to obtain a judgment against a non-paying debtor in order to be eligible to recover the money you are owed. An exception, of course, is for secured creditors. If a secured creditor is dealing with a non-paying debtor, it is usually possible to repossess the asset that has secured the loan, such as a motor vehicle. Similarly, some credit cards are secured, and the creditor may be able to repossess assets purchased with the secured credit card if the debtor is behind on payments. These secured assets are not protected from creditors. However, for unsecured creditors, it will usually be necessary to obtain a judgment against the debtor in order to recover.

After you have obtained a judgment against a debtor, it is important to know that there are still some types of assets that are protected from creditors. Generally speaking, following a judgment, you may be able to enforce the judgment through a wage garnishment, a lien, or a levy of the debtor’s bank account. However, some of the assets associated with these accounts are protected from creditors. With wage garnishment, New Jersey protects anywhere from 75% to 90% of a debtor’s wages from creditors. Liens can be attached to a debtor’s property, but typically liens can only be attached to real property, and personal property is protected. These enforcement actions can also only be taken if the statute of limitations has not run out on the case.

Many Assets are Protected in Bankruptcy

Once a debtor files for bankruptcy, creditors should know that the automatic stay prevents them from attempting to collect any debts unless they successfully petition the court to lift the automatic stay. In bankruptcy, a wide range of assets are protected from creditors, including but not limited to the following:

– $1,000 of personal property of the debtor’s choosing

– Personal clothing

– $1,000 value of furniture or other household goods

– Burial plots

– Retirement accounts and public pensions

– Public assistance benefits

– Workers’ compensation benefits

– Unemployment compensation

– Crime victims’ compensation benefits

– Civil defense workers’ benefits

– Health insurance benefits

– Disability benefits, including SSDI or SSI benefits, and veterans’ disability benefits

– Life insurance proceeds or dividends

– Annuity proceeds up to $500 per month

– Up to 90% of the debtor’s wages.

When a creditor is attempting to collect on debts after a debtor has filed for bankruptcy, it is essential to seek advice from a New Jersey collections attorney about options for lifting the automatic stay or for taking steps to ensure that you will be repaid. As you may know from previous experiences with collections, creditors are repaid in bankruptcy cases based on priority, and unsecured creditors who are identified as having non-priority claims may not receive the money they are owed in full. Depending upon the circumstances, it may be possible to ask the court to lift the automatic stay, or you could have other options for collecting the debt you are owed. In a Chapter 7 bankruptcy case, any assets that are not exempt — and that are not protected from creditors — will be liquidated in order to repay creditors in order of priority.

Contact a New Jersey Collections Attorney

When your business is owed money and you are struggling to recover the money owed from the debtor, it is essential to learn more about your options. Depending upon the circumstances, you could be eligible to repossess property that is not protected from creditors. Even if the debt is not a secured debt, you could file a lawsuit against the debtor in order to receive a judgment, after which point you can take enforcement actions to recover money or assets held by the debtor that are not protected from creditors under New Jersey law. In cases where the debtor has filed for bankruptcy, you should work with our collection lawyers in NJ to determine your options for being repaid. Contact Snellings Law LLC today for assistance.