What Happens to My Home if I File for Chapter 7 Bankruptcy in New Jersey?

Filing for Chapter 7 bankruptcy in New Jersey is a way to eliminate overwhelming debt, but many homeowners fear losing their homes in the process. Whether you keep your home depends on several factors, including your mortgage status, home equity, and New Jersey’s exemption laws. At The Law Offices of Andy Winchell, P.C., we help New Jersey residents understand how bankruptcy impacts their property and financial future.

How Chapter 7 Works

Chapter 7 bankruptcy is often referred to as "liquidation bankruptcy." A court-appointed trustee may sell certain assets to repay creditors, but not all property is taken. Federal and state laws provide exemptions that allow you to keep essential assets, including some or all of your home equity.

Mortgage Payments and Foreclosure

If you are behind on mortgage payments, filing Chapter 7 will not erase the lender’s right to foreclose. However, it may temporarily stop foreclosure through the automatic stay, giving you time to consider options. If you are current on your mortgage and your equity falls within New Jersey’s exemption limits, you may be able to keep your home.

The Role of Equity and Exemptions

Equity—the difference between your home’s value and the mortgage balance—is key. In New Jersey, homeowners may choose between federal or state exemptions. The federal homestead exemption, for example, allows protection of a certain amount of equity. If your equity exceeds the exemption amount, the trustee could sell the home, pay off the mortgage, and distribute remaining funds to creditors.

Other Considerations

• Second mortgages or liens: These can reduce equity, which may help protect your home.
• Property type: Exemptions may apply differently to primary residences versus investment properties.
• Future affordability: Even if you keep your home, you’ll need to maintain ongoing mortgage payments.

Moving Forward

Bankruptcy does not always mean losing your home. With the right legal guidance, many people are able to keep their primary residence while discharging burdensome debt.

At The Law Offices of Andy Winchell, P.C., we can provide legal assistance to the New Jersey public in navigating bankruptcy and protecting their homes.