Saving Your Home in New Jersey Bankruptcy
The thought of losing your home because of a temporary setback, issues with your business recovering because of the pandemic, or sudden changes in the market is devastating. You may be reluctant to file for New Jersey bankruptcy because a bankruptcy proceeding could potentially result in either losing your home or preventing a potential purchase of a home in the future.
Predatory real estate investors, companies, and mortgage lenders understand the law, and they know how to take advantage of everyday hardworking people. With some help, it's clearer and easier to understand how to fight back and prevent foreclosure. Here is some information every homeowner needs to know.
How Foreclosure in New Jersey Works
Losing a home in foreclosure may occur in three separate ways:
- Foreclosure complaint by the mortgage company - This occurs when a mortgage goes unpaid, the individual becomes delinquent, and the mortgage company warns the homeowner of their intent to foreclose the home. The company will then file a foreclosure complaint in Superior Court, which may take approximately six months to a year for a judgment of foreclosure.
- Tax sale foreclosure - If property taxes are unpaid, the town does not have to carry the debt. It can give notice of an auction of the delinquent property taxes. Investors will pay the property taxes for the homeowners. In exchange, the investor who wins the bid can hold the certificate and gain interest on the amount paid for the tax certificate. Please note that these liens have priority over all other liens and encumbrances, which means that the holder of the tax sale certificate gets paid before other individuals upon the sale of the home, even the mortgage company.
- Judgment Creditor - An individual or company may get a judgment in court for an unpaid debt. One of the various sanctions for not paying on a judgment is to sell that debtor's assets, including their home, through foreclosure.
In any of the above examples, you might feel stuck between a rock and a hard place. On the one hand, you want a fresh start, but on the other hand, you feel like you could lose your home anyway.
How the Homestead Exemption Works
The good news is that the United States Bankruptcy Code has sections that not only give you a fresh start but also allow you to save your home. Going into a New Jersey bankruptcy, there is a specially carved out "homestead exemption." The federal exemption adjusted is $27,900, which means that you can save $27,900 worth of equity in your home as of right now. Here are some of the most commonly asked questions about the homestead exemption and the answers.
What if you have more equity in your home than the homestead exemption?
There are various options available, including a payment plan as well as entering into the “Loss Mitigation Program.”
What if your home is foreclosed on, and there is a sheriff’s sale?
A sheriff's sale is a public auction of real property at the end of the foreclosure process. A foreclosure occurs when payments have not been made on a mortgaged property. § 1322(c) of the Bankruptcy Code allows you to save your home before the sale, even if the sale has been scheduled! Debtors have 60 days of filing to refi, pay, or get consent to cure once the gavel falls. Some courts find the property is not sold until the sheriff delivers the deed. If there is a viable plan to pay back the mortgage, all property will revest in the debtor upon entry of an order confirming the plan.
What if you want to sell the property?
A central policy of the Bankruptcy Code is the [e]quality of distribution among creditors. This means you may be able to work out a plan that allows for the sale of your home and to reconcile the other creditors' debts.
How to File for New Jersey Bankruptcy
It is critical that you consult with an attorney before filing any New Jersey bankruptcy petition. If you or someone you know is interested in filing for bankruptcy or has any questions, please do not hesitate to contact A. Brown Esq. LLC at 973-281-2388.