It’s possible to file under either Chapter 7 or Chapter 13 and keep your home, but there are requirements and limitations. With a Chapter 7 petition, in which you seek to permanently discharge certain debts, you can keep your home if you are current on all payments, and either state or federal exemptions protect your equity from seizure by the bankruptcy court. When you file under Chapter 13, you keep your house and simply enter into a new payment arrangement with your mortgage-holder. You may be able to get late fees and penalties waived, and may even be able to negotiate new terms, but you’ll still have to make payments.
Under Chapter 7, there’s a trade-off for the right to permanently discharge certain debts—you must turn non-exempt property over to the bankruptcy trustee. That property is typically sold, with the proceeds used to repay your creditors. There is an exemption for the equity in your home. If the permitted exemption on your home is enough to cover your equity, there’s no benefit to the bankruptcy court in seizing your home and selling it, as all profit would go to you. On the other hand, if you have more equity than you can protect, it’s in the bankruptcy court’s interest to take your home, sell it, disburse the equity to you, and use the surplus amount to repay creditors.
At the office of Howard N. Sobel, we work closely with people in New Jersey in personal bankruptcy filings. Contact our office online or call us at 856-424-6400 to set up a free initial consultation (on selected cases). We are currently available by phone, text message or videoconference only. Evening and weekend appointments can be arranged upon request. We accept all major credit cards.
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