Can I keep my home when filing for bankruptcy?

On Behalf of | Aug 2, 2022 | Bankruptcy

People facing overwhelming financial challenges may wonder what options are available and which one best suit their needs. Bankruptcy may be the best way for some people to get into a stronger financial situation, but many New Jersey residents fear that filing for bankruptcy will mean that they will lose their homes. Fortunately, it is possible to retain a home after bankruptcy.

Keeping a home

In general, people who want to keep a home can do so under Chapter 13 bankruptcy. Since it is comparable to a consolidation loan that must be paid back in three or five years, those who are behind on their mortgage payments and are confronted by the possibility of foreclosure can use Chapter 13 to save the property.

In some narrower cases, people can keep the property under Chapter 7. Chapter 7 is a liquidation bankruptcy meaning a trustee takes much of the person’s property and sells it to pay back creditors. Those with few assets can clear unsecured debt like credit cards and medical bills and keep properties if they were below a certain value. The trustee will assess the property to decide if it should be liquidated or is exempt. New Jersey does not have a  homestead exemption, but some filers may be able to use the federal system.


People who have equity in their home will not want to use Chapter 7 as they will lose the property. The objective of selling a person’s property is for the trustee to pay back creditors. Without equity, there will be nothing to pay. If there is very little equity or no equity at all, the property may be deemed exempt.

For complex questions about bankruptcy, it is important to have legal guidance

In general, people who do not have many assets are better off filing for Chapter 7 as it clears the debt in a relatively short time and they can move forward free from the stress of owing substantial sums. Under Chapter 13, the person will be obligated to pay a certain amount to the trustee each month. In exchange, they will retain various properties – including a home.

Every case is different and people need to think about their circumstances before moving forward. Having experienced assistance from professionals who understand all levels of bankruptcy and what it can accomplish is a wise start.

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