Filing for Chapter 7 bankruptcy raises questions about what will happen to your home. If you’re struggling with debt, you may wonder if you’ll lose your home or if you can keep it. The answer depends on several factors. Understanding how different situations can impact you is important.
The role of exemptions in Chapter 7
New Jersey bankruptcy law provides exemptions that allow you to protect a portion of your home’s equity. The exemption limits depend on state law and can change over time. Under New Jersey’s homestead exemption, you can protect up to $1,000 in equity in your home if it’s your primary residence. However, this may not be enough if you have significant equity.
If your home has more equity than the exemption allows, the bankruptcy trustee may sell the home to pay off your creditors. After the sale, the trustee would distribute any remaining equity to you.
Keeping your home if you’re behind on payments
If you’re behind on your mortgage payments, you may face foreclosure even after filing for Chapter 7 bankruptcy. Bankruptcy can temporarily halt the foreclosure process, but it doesn’t remove your mortgage debt. If you cannot catch up on your payments, the lender may proceed with foreclosure after bankruptcy.
You can potentially keep your home if you bring the mortgage current during bankruptcy or if the lender agrees to a new payment arrangement. However, Chapter 7 doesn’t offer a long-term solution for keeping your home if you can’t make the payments.
Conclusion
Whether or not you can keep your home in Chapter 7 bankruptcy depends on your situation. Exemptions protect part of your home’s equity, but if you have significant equity or fall behind on mortgage payments, your options may be limited. If you’re considering Chapter 7, review your financial situation carefully to understand how it could affect your home.
