For most folks filing bankruptcy, their greatest asset is almost always real estate. That is certainly true here in the Gloucester County area. One of the biggest questions I get from people with whom I consult is, will I lose my house if I file bankruptcy? The question I often ask is, it depends: is it your house or your residence?
What Difference Does "Residence" Make?
Huh? What difference does that make? It's my house! Well, I am here to tell you that it can make a big difference, and that difference comes in with what exemption you can use. A residence is where you live, and is a key word in the federal home equity exemption used here in New Jersey.
The bankruptcy code provides an exemption for the equity "in real . . . or personal property that the debtor or a dependent of the debtor uses as a residence."
How Could This Happen?
Now, let's say that you moved from one house because you bought another one, but still own the first because you were unable to sell it. Your new home has little or no equity, but there is a fair amount in the old one. You have a tenant in the old house to pay rent that covers the mortgage payment, but you have to file bankruptcy due to credit card debt and medical bills.
Because you do not live in the old house, it isn't your residence. Therefore the only exemption you can use is the "wildcard" exemption, which is half of the home equity one!
The dilemma comes in when the net equity in the old house would be protected with the home equity exemption, but not protected by the "wildcard." You then face the potential of losing that house in a chapter 7.
It can also increase the amount of your plan payment in a chapter 13 because you still have to pay out that vulnerable net equity to creditors.
So What Do I Do?
Bankruptcy can often help homeowners get back on their feet financially, but the inability to use certain exemptions can definitely put a crimp in your plans. Have a good bankruptcy attorney look at your case and see whether you are in any danger of losing assets in the process of losing your debts.
I Can Help!
If you live here in the Gloucester County New Jersey area and are considering filing bankruptcy, please feel free to call my office at 856-432-4113 or contact me through this site for a free consultation to discuss your case.
If you are looking for more information about bankruptcy, then download my free book,Top Questions People Ask About Filing Bankruptcy in New Jersey.