Will bankruptcy help me keep my New Jersey home?

Losing the home may be at the top of someone’s concerns when considering bankruptcy in New Jersey.

Of the many worries that people in New Jersey have when facing financial turmoil, keeping the house may be at the top. A house is much more than a place to live; it's a home where memories are made and treasured. Losing a home could, potentially, put people in even worse situations than they were in before.

The easiest way to keep a home is to pay the mortgage on time. However, making those payments the mortgage may seem almost unfathomable to someone struggling to make ends meet. Fortunately, through exploring bankruptcy options, keeping the house may be possible.

Consider home equity

Consumers filing for bankruptcy may be familiar with the term "exemptions." In both Chapter 7 and Chapter 13 filings, there are exemptions, which means that certain property may be exempt from being seized to pay off debt.

There are a few factors that come into play here. A Chapter 7 bankruptcy often has less flexibility in terms of exemptions than a Chapter 13. However, in a Chapter 7 filing, only the equity - or the value of the home less the mortgage balance - is taken into consideration. New Jersey does not have a homestead exemption. Instead, many people choose to use the federal exemptions. According to the law, this year, the amount is $23,675. Therefore, someone who has that amount or less in equity may be able to keep the home because it would be considered exempt.

The Chapter 13 payment plan

One of the nice aspects of a Chapter 13 bankruptcy is that, typically, consumers do not have to forfeit property. Instead, they devise a plan for how to make payments on their debts. So someone who is behind on mortgage payments would be able to make up arrears through the plan, which spans five to six years. Even if the house has already fallen into foreclosure, a Chapter 13 creates an automatic stay on the property, allowing the homeowner to develop a plan for repayment.

When bankruptcy may not work

There are several circumstances under which someone could still lose a home even after deciding to file for bankruptcy. Those situations include the following:

  • Failing to make payments on the mortgage under the Chapter 13 plan
  • The bank completing the foreclosure before the bankruptcy petition is filed
  • Having to sell a non-exempt home in a Chapter 7 bankruptcy in order to satisfy debts.

Each bankruptcy case comes with its own set of unique circumstances. Therefore, there is no guarantee that someone will keep his or her house under these guidelines alone. Anyone who has concerns about this issue should speak with a bankruptcy attorney in New Jersey.