Debt can feel like an overwhelming financial burden, especially when you start worrying about where you live. If you are considering bankruptcy in New Jersey, your biggest fear is likely losing your home.
Provided you meet certain legal requirements, federal and state laws offer robust protections to help you keep your residence while reestablishing your financial footing.
How much equity can be protected?
In bankruptcy, the focus is on your equity, meaning the home’s current market value minus what you still owe on your mortgage. In New Jersey, you have the choice between using Federal exemptions or New Jersey State exemptions.
While the federal limits are adjusted every three years, New Jersey recently enacted its own homestead exemption to provide significantly higher protection for many homeowners.
The federal option (Effective April 1, 2025 – March 31, 2028):
- Homestead exemption: You can protect up to $31,575 in equity in your primary residence.
- Married couples: If you and your spouse file jointly, this amount doubles to $63,150.
- Wildcard exemption: You also have a “wildcard” of $1,675 plus up to $15,800 of any unused portion of the homestead exemption. This can be used to protect cash, vehicles or other personal assets.
Carefully evaluating these federal limits against your current home value is essential to determining how much of your property remains shielded from creditors.
Which filing type is right for keeping your home?
The type of bankruptcy you choose also matters. In a Chapter 7 bankruptcy, the goal is to wipe out unsecured debt like credit cards. If your chosen exemptions fully cover your home equity and you are current on your payments, you may be able to keep the house.
If you are behind on your mortgage payments, Chapter 13 bankruptcy might be a potential remedy. This option creates a three- to five-year repayment plan. It allows you to catch up on missed payments over time while the “automatic stay” prevents the bank from foreclosing on you.
Your next step: Check your equity
While bankruptcy can wipe out other debts to alleviate your overall financial burden, it does not eliminate your mortgage. To keep your home, you must continue making your monthly payments.
You may review your most recent mortgage statement and compare your balance to your home’s current market value. Knowing how much equity you have is a vital first step in determining which exemption strategy is right for your situation.
The Judicial Conference of the United States adjusts federal bankruptcy exemption amounts every three years. The figures above apply to cases filed between April 1, 2025, and March 31, 2028.