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If I file bankruptcy in NJ, will I lose my house?

Most people that are thinking about filing a Chapter 7 bankruptcy are worried about whether or not they will lose their homes as a result. But here in southern New Jersey that is a rare occurrence. Do you want to know why?

The answer lies in a very simple procedure, called a liquidation analysis that can be done to determine whether or not the home would be at risk. In order to do this, you need two pieces of information:

  1. the appraised value of your home; and
  2. written payoff statements on all liens (usually mortgage loans).

From the appraised value of the home, you deduct the payoff amount for all mortgage liens and the cost of selling it (which is presumed to be 10% of the home's value). Then you get your share of the equity! This is due to a provision in the bankruptcy code called an "exemption" that allows homeowners to keep the equity in their homes up to a certain amount.

If both spouses are filing, the exemption would then be deducted for each spouse (i.e. up to $45,950.00, as of 2014). If only one spouse is filing, the rule of thumb would be to take the remaining balance of equity (if there is any), and divide it by 2. The debtor spouse's exemption ($22,975 as of 2014) would then be deducted. If the filer is single, then the individual exemption is taken from the equity.

If you come up with zero or a negative number, it is highly unlikely that the trustee would seek to sell your home in a chapter 7 bankruptcy. If you come up with a positive number, then there is a chance, depending how much is involved, that the trustee might be interested in selling it.

So What Do I Do?

If you are considering bankruptcy, you should have an attorney do the analysis for you to be sure. If you live in southern New Jersey, please feel free to call me at 856-432-4113 or contact me through this site for a free consultation in my Woodbury office to discuss your case and the risk to your home.

If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.

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