If I file a Chapter 7 Bankruptcy can I keep my house?

Yes, often you can. However, if your house is worth much more than what you owe on it, there could be a problem.

A simple analysis is to deduct 10% of the appraised value from the house, and then deduct the payoff of the mortgages and home equity loans. In New Jersey, if it is your primary residence, you then deduct the exemption of $22,975.00  if one person owns the home, or $45,950.00   if it is owned by a husband and wife.

The 10% approximates the cost of sale, and the exemption is the amount a homeowner gets to keep as a homeowners exemption.  If the result is -0-, there is no equity in the house, and a Chapter 7 Debtor will be able to keep the house under Bankruptcy Law. Under NJ State Law, they must continue to pay for the house, or the Mortgage company might seek foreclosure.

Often times people who meet with me want to keep a home, they want to own a home. However, too often they don’t really own the home, the home owns them! The pressure of paying for a home, often mostly interest, is so great that it really sucks the emotional health out of a family. Is it worth keeping a home, and paying mostly interest, taxes and insurance, when you might be able to rent a home more affordable to you? Chapter 7 often does allow a debtor to eliminate the debt, and simply walk away from the house. Every case is different, of course, but often times there is a tremendous amount of relief provided by the Bankruptcy Code.