A New Jersey Bankruptcy Lawyer Explains the Consequences of Bankruptcy on Your Home

If you are considering Chapter 7 bankruptcy, you may be understandably anxious about the potential loss of your home, a concern that often weighs heavily on your decision. However, in the unique context of Southern New Jersey, this fear is usually unfounded, and losing one's home is a rare occurrence in these bankruptcy cases. Learn more about how, as a New Jersey bankruptcy lawyer, I can help you get out of debt without risking your home.

Assessment by the Bankruptcy Trustee on the Sale of Your Home

Determining whether you are at risk for losing your home depends on state-specific bankruptcy exemptions, the nature of Chapter 7 bankruptcy proceedings, and local real estate market dynamics.

If you are concerned about losing your home in bankruptcy, a very simple procedure called a liquidation analysis can be done to determine whether or not the home would be at risk. The first step is to determine your equity in the home. To do this, you need two pieces of information:

  1. The appraised value of your home
  2. Written payoff statements on all liens (usually mortgage loans)

From the home's appraised value, 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). This is the net equity figure. But the trustee usually can't take this.

Bankruptcy Exemption

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 file, the exemption would be deducted for each spouse (check out current exemption amounts here). 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 two. The debtor spouse's exemption would then be deducted. The individual exemption is taken from the equity if the filer is single.

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 that the trustee might be interested in selling it, depending on how much is involved.

What You Can Do

While it may be highly unlikely that you will lose your home in a NJ bankruptcy, the possibility exists. Why take that chance? Have an experienced bankruptcy attorney by your side to do the test and be sure before you file. 

If you live in Burlington, Camden, Gloucester, Salem, or Cumberland County, know you need to file bankruptcy and are ready to take action, then 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 want more information about bankruptcy, download my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.

Not sure if bankruptcy is right for you? Take the quiz to the right to find out more.

Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.