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

A:

Most people that go into a Chapter 7 bankruptcy are concerned with whether or not they will lose their homes as a result. However, a very simple procedure, called a liquidation analysis, 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). If both spouses are filing bankruptcy, the bankruptcy code's home equity exemption would then be deducted for each spouse (i.e. up to $43,250.00, as of 2010). 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 ($21,625 as of 2010) would then be deducted. 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.

In any event, you should contact my office for a free consultation on this issue before filing so I can do a more detailed analysis for you, especially since these exemption amounts change periodically.

Have more questions about bankruptcy?  Get the answers to the most frequently asked questions by downloading my free book, Top Questions People Ask About Filing Bankruptcy in New Jersey.  It will give you the answers you need all in one place.  Then call me at 888-857-8418 or contact me through this site for an appointment for a free consultation to discuss your case.