When debts start piling up and bankruptcy feels like the only way out, a big question looms over your head: “Will I lose my house?”
It’s a scary thought, and the answer isn’t a simple yes or no. It depends on a few things, like the type of bankruptcy you file, how much your house is worth, and if you’re behind on your mortgage payments.
This guide will walk you through how Chapter 7 and Chapter 13 bankruptcy can affect your home in New Jersey. We’ll also look at the protections available and when selling your house before filing for bankruptcy might be a better option.
The two main types of personal bankruptcy, Chapter 7 and Chapter 13, treat your house very differently.
Chapter 7 is for people who can’t realistically pay back their debts. A trustee appointed by the court will look at your assets and might sell some of your property to pay your creditors. If you have more equity in your home than what’s protected by New Jersey’s laws, the trustee could sell your house.
But, if your equity is within the protected limit and you’re up to date on your mortgage, you can usually keep your home in a Chapter 7 bankruptcy. The whole process usually takes about three to six months.
Chapter 13 is often a better choice for homeowners. It lets you keep your property while you pay back your debts over a three-to-five-year plan. If you’re behind on your mortgage, Chapter 13 can stop foreclosure and let you catch up on your missed payments.
NJ federal bankruptcy courthouse exterior
The catch is that you need a steady income to make the plan payments, and you’ll be under the court’s financial supervision for a few years.
Every state has laws that protect certain assets during bankruptcy. In New Jersey, you can choose between federal and state exemptions. Which one is better for you depends on your situation.
The federal homestead exemption protects a certain amount of equity in your main home. New Jersey’s own exemptions have been less generous in the past, so many people choose the federal option. A bankruptcy lawyer can help you figure out which one is best for you.
If you have more equity in your home than the exemption allows, a Chapter 7 trustee might try to sell it. In New Jersey’s hot real estate market, this is a real worry for many homeowners.
Important: Bankruptcy laws are complicated and can change. Always talk to a New Jersey bankruptcy lawyer before you make any big decisions.
One of the best things about filing for bankruptcy is the “automatic stay.” This is a court order that temporarily stops most creditors from trying to collect from you. This includes stopping foreclosure.
The stay is temporary. In Chapter 7, it usually lasts until your case is over, which is about three to six months. In Chapter 13, it lasts for the entire repayment plan, as long as you keep up with your payments.
This break can be a lifesaver if you’re facing foreclosure, but it’s not a permanent fix.
Chapter 7 vs Chapter 13 comparison graphic
Sometimes, selling your home before you file for bankruptcy can be the best way to protect your money and get a fresh start.
Here’s why:
A direct sale to Holly Nance Group can be done in as little as seven days. We don’t charge any commissions or fees, and we pay for all the closing costs.
If you’re dealing with both foreclosure and bankruptcy, things can get stressful. Filing for bankruptcy will pause the foreclosure, but it’s not a permanent solution.
In Chapter 7, the foreclosure can start again after your case is over. In Chapter 13, you can catch up on your payments, but if you fall behind on your plan, the lender can ask the court to continue with the foreclosure.
For many homeowners in this situation, selling their house quickly is the best way out. It gets rid of the mortgage, avoids a foreclosure on your credit report, and gives you money to start over.
At Holly Nance Group, we have a lot of experience helping homeowners in foreclosure. We can work with your lawyer to make sure the sale fits into your overall financial plan.
Will I definitely lose my house if I file Chapter 7 in New Jersey?
Not always. If you don’t have too much equity and you’re current on your mortgage, you can often keep your home.
Can I sell my house during a Chapter 13 plan?
Yes, but you’ll probably need the court’s permission. The money from the sale might have to go towards your repayment plan.
How long does bankruptcy stay on my credit report?
Chapter 7 stays on your report for ten years, and Chapter 13 stays for seven years. But you can start rebuilding your credit much sooner.
Is there a way to avoid bankruptcy?
Selling your home for cash can get rid of your biggest debt and give you money to pay off other bills. For many people, this is a way to avoid bankruptcy and get a real fresh start.
Should I talk to a lawyer before selling?
Yes. If you’re thinking about bankruptcy, talk to a lawyer before you make any big financial moves, like selling your house.
Bankruptcy is a huge decision with long-term effects. Before you file, it’s a good idea to look at all your options, including selling your home quickly to get out of debt and protect your financial future.
Holly Nance Group has been helping New Jersey homeowners with financial problems for over 20 years. Our team includes a former lawyer who understands how complicated and emotional these situations can be. We offer free consultations, and you’re never obligated to take our offer.
Ready to see what your options are?
Call us today at (856) 215-5474 or ask for your free cash offer online.
Most homeowners hear back from us within 24 hours.
Your home. Your decisions. We’re just here to help you understand all your options.
Holly Nance Group — Your trusted local New Jersey cash home buyer since 2012.
Helping New Jersey & Pennsylvania homeowners sell with clarity, confidence, and speed. No matter how complicated it gets.
