Sponsored by:
Assemblyman DAN HUTCHISON
District 4 (Atlantic, Camden and Gloucester)
Assemblyman CODY D. MILLER
District 4 (Atlantic, Camden and Gloucester)
SYNOPSIS
Establishes homestead and bank account exemptions for persons in debt.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning exemptions from debt execution or attachment, supplementing Title 2A of the New Jersey Statutes and amending N.J.S.2A:17-19.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. (New section) As used in this act:
“Condominium” means the same as defined pursuant to section 3 of the “Condominium Act,” P.L.1969, c.257 (C.46:8B-3).
“Dwelling house” means any residential property assessed as real property; but, the term shall not include a unit in a condominium or a horizontal property regime.
“Homestead” means any of the following if it is the primary residence of the owner, the owners’ family members, or anyone who has an interest in the property:
(1) a dwelling house, appurtenances, and any land on which that dwelling house and any appurtenances are located;
(2) a condominium unit or a unit in a horizontal property regime; or
(3) a manufactured home as defined pursuant to section 2 of P.L.1990, c.61 (C.54:4-8.58), including any appurtenances and land on which the manufactured home and any appurtenances are situated.
Notwithstanding section 2 of P.L.1990, c.61 (C.54:4-8.58), manufactured homes constructed before 1974 shall be included in the definition of homestead even if they were not manufactured in accordance with the National Manufactured Housing Construction and Safety Standards Act of 1974.
“Horizontal property regime” means the form of real property ownership provided for under the “Horizontal Property Act,” P.L.1963, c.168 (C.46:8A-1 et seq.).
“Owner” means, but is not limited to, a natural person who is a sole owner, joint tenant, tenant by the entirety, tenant in common, life estate holder, a holder of a beneficial interest in a trust, a purchaser under a deed of trust, mortgage, or contract, or a holder of a remainder interest.
“Principal residence” means a homestead occupied by the owner or a member of the owner’s immediate family as the owner's or family’s primary residence, as distinguished from a vacation home, property owned and rented or offered for rent by the owner, and other secondary real property holdings.
2. (New section) a. In the case of bankruptcy, each owner may exempt from attachment, execution, and forced sale a homestead as defined pursuant to section 1 of P.L. , c. (C. ) (pending before the Legislature as this act).
b. An owner who is entitled to a homestead exemption shall hold that exemption by operation of law and no written claim or recording shall be required.
c. The owner's exemption allowed pursuant to this section shall be determined on the date the bankruptcy petition is filed or, with respect to property that becomes property of the estate after that date, the date the property becomes property of the estate.
d. The exemption allowed pursuant to this section shall not apply to real property that is part of and subject to a community association; condominium association; homeowners’ association; cooperative; or any other common interest association that may be subject to the “Planned Real Estate Development Full Disclosure Act,” P.L.1977, c.419 (C.45:22A-21 et seq.), but only with respect to claims regarding unpaid assessments; special assessments; rent, in the case of a proprietary lease; cooperative shares; and other charges due and owing the community association arising out of the real property for which the homestead exemption is sought.
3. (New section) a. A homestead exemption may be abandoned by any of the following:
(1) a declaration of abandonment or waiver;
(2) a transfer of the homestead property by deed of conveyance; or
(3) a permanent removal of the owner as a resident of this State. The owner may be removed from the homestead for up to two years without an abandonment or a waiver of the exemption.
b. A declaration of abandonment or waiver pursuant to paragraph (1) of subsection a. of this section shall be executed by the owner and acknowledged. A declaration of abandonment or waiver is effective only from the time of its recording in the office of the county clerk.
4. (New section) The homestead exemption provided pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) shall not affect or apply to attachments, executions and sales in connection with court judgments concerning:
a. fraud;
b. fraudulent transfers or conveyances;
c. duress; or
d. fraud, deceit, or manipulation in a fiduciary capacity.
5. N.J.S.2A:17-19 is amended to read as follows:
2A:17-19. Amount; exceptions
[Goods and chattels, shares of stock or interests in any corporation and personal property of every kind, not exceeding in value, exclusive of wearing apparel, $1,000.00, and all wearing apparel, the property of a debtor shall be reserved, both before and after his death, for his use or that of his family or his estate, and shall not be liable to be seized or taken by virtue of any execution or civil process whatever, issued out of any court of this State.
Nothing herein contained shall be deemed or held to protect from sale under execution or other process any goods, chattels or property, for the purchase whereof the debt or demand for which the judgment on which such execution or process was issued, shall have been contracted, or to apply to process issued for the collection of taxes or assessments.]
a. (1) It shall be required that $3,500 in cash, in a deposit account or other account of the debtor, or in a joint account, shall be reserved if the debtor receives approval of a petition for protection of those funds by a court of competent jurisdiction. The funds shall be reserved, both before and after death, for the debtor’s use or that of the debtor’s family or estate, and shall not be liable to be seized or taken by virtue of any execution or civil process issued from any court of this State, and shall be accessible to the debtor regardless of whether the debtor files for bankruptcy. A garnishment order issued against a bank or other account that has received an order of protection pursuant to this subsection shall instruct the garnishee that it is to garnish only the amount exceeding $3,500 in a joint account. If the judgment debtor has grounds to claim that more than $3,500 is exempt, the judgment debtor is entitled to file a petition in a court of competent jurisdiction to that effect.
(2) The garnishee shall be served with a notice from the judgment creditor instructing the garnishee to protect the exempt amount, to preserve the judgment debtor’s access to the exempt amount, and to notify the judgment debtor of the garnishment or attempted garnishment, including information about the procedure by which the judgment debtor may object to the seizure of any funds that exceed the amount made exempt by this subsection. In addition to the notice to debtor required to be sent by R.4:59-1(h) and R.6:7-1(c) of the New Jersey Rules of Court, the Department of Banking and Insurance shall draft and publish a form that the judgment creditor shall be required to use to give the notice required by this subsection.
(3) An institution that is served with an execution or other civil process on funds held in a judgment debtor’s account shall charge no fee to the judgment debtor regardless of any terms of agreement, or schedule of fees, or other contract between it and the judgment debtor if:
(a) the judgment debtor’s funds are entirely exempt pursuant to paragraph (1) of this subsection; or
(b) funds are garnished or executed upon in violation of any section of P.L. , c. (C. ) (pending before the Legislature as this bill).
b. The amount set forth in paragraph (1) of subsection a. of this section shall be automatically adjusted to reflect changes by the percentage change, if any, from January 1st to December 31st of the preceding year, in the Consumer Price Index for All Urban Consumers, the Annual City Average, for the Mid-Atlantic Region, or any successor indexes, as published by the Bureau of Labor Statistics within the United States Department of Labor, or its successor agency, beginning January 1st, 2024 and every three years thereafter. The Department of Banking and Insurance shall triennially publish the three-year adjustment on April 1st of the following year. Adjustments made pursuant to this paragraph shall be rounded up to the next $50.
c. Payments made pursuant to sections 24 or 32 of the "Internal Revenue Code of 1986" (26 U.S.C. s.24 or 26 U.S.C. s.32) are exempted from seizure on execution whether the payment has been received or is pending.
(cf: P.L.1973, c.162, s.1)
6. This act shall take effect on January 1, 2027, except that the Commissioner of Banking and Insurance may take such anticipatory administrative action in advance thereof as shall be necessary for the implementation of this act.
STATEMENT
This bill establishes homestead and bank account exemptions for persons in debt. Under the bill, an owner who has declared bankruptcy can exempt from an attachment, execution, and forced sale a homestead. “Homestead” is defined in the bill to mean any of the following if it is the primary residence of the owner, the owners’ family members, or anyone who has an interest in the property: 1) a dwelling house, appurtenances, and any land on which that dwelling house and any appurtenances are located; 2) a condominium unit or a unit in a horizontal property regime; or 3) a manufactured home, including any appurtenances and land on which the manufactured home and any appurtenances are situated. “Homestead” excludes personal property. The exemption does not apply to real property that is part of and subject to a common interest association that may be subject to other current statutory provisions, but only with respect to claims for charges due and owing the community association arising out of the real property for which the exemption is sought.
The bill provides that, in a bankruptcy case, the owner’s exemptions shall be determined on the date the bankruptcy petition is filed or, with respect to property that becomes property of the estate after that date, the date the property becomes property of the estate.
Additionally, the bill updates current law by removing the exemption for certain goods, chattels, shares of stock or interests in any property of every kind up to a certain dollar amount and adding a bank account exemption, regardless of whether a debtor files for bankruptcy, of up to $3,500 in cash for a deposit account or other account of a debtor, or a joint account. The funds in a bank account are to be exempt from execution after the debtor receives approval of a petition for reservation of the funds by a court of competent jurisdiction. The bill further establishes a process by which a person is to be notified to protect the exempt amount and by which the person can object to the seizure of any funds.