New Jersey Homestead Laws

People can be reluctant to file for bankruptcy out of fear of losing their home. Becoming familiar with bankruptcy laws can help you know what to expect during the process, including the likelihood of keeping your primary residence.

Most states offer homestead protection laws that allow people to stay in their home by protecting some or all of the equity. Homestead laws are in place to reduce the threat of homelessness due to hardship.

New Jersey is one of only two states that do not offer this protection for a principal residence. While there’s no homestead exemption in the Garden State, New Jersey residents are still protected. Federal homestead exemptions are available to New Jersey homeowners.

This article explains how to protect your real property in the event that you file Chapter 7 or Chapter 13 bankruptcy. It also examines the specific exemption amount that will apply to your bankruptcy proceedings.

If you’re in the middle of a bankruptcy or are considering filing for relief under the bankruptcy laws, contact a New Jersey bankruptcy attorney. Financial struggles shouldn’t cost you your home when debt relief may be available through bankruptcy.

Exemptions for New Jersey Bankruptcy Filers

Regardless of whether you’re filing a Chapter 13 or a Chapter 7 bankruptcy case, New Jersey doesn’t offer property owners a homestead exemption when they file Chapter 7 bankruptcy. However, bankruptcy filers can apply the federal homestead exemption if they have equity in their home.

When it comes to homestead exemption laws, the actual value of your home doesn’t matter. The exemption protects the equity in your home, not the house itself. If the equity in your home is less than the amount of the homestead exemption, then the bankruptcy trustee can’t sell your home to pay your creditors.

If the amount of equity in your house is greater than the homestead exemption, then there is a chance that the trustee will sell your property and distribute the proceeds to your creditors. To avoid this worst-case scenario, consider seeking legal advice from a New Jersey bankruptcy lawyer before filing your bankruptcy petition.

Applying the Federal Homestead Exemption

Since the state of New Jersey doesn’t offer a homestead exemption, people who file bankruptcy in New Jersey must turn to the federal homestead exemption. The specific amount of this exemption increases every three years.

For the years 2025 through 2028, the federal homestead exemption is $31,575 per person. Married couples who own real property together can claim a total exemption of twice that amount ($63,150). The amount is the same regardless of which municipality your primary residence is located in.

Before taking advantage of the federal homestead exemption, you’ll need to decide which type of bankruptcy you’re filing for. Whether you opt for Chapter 7 or Chapter 13 will depend on your financial situation and which eligibility requirements you meet. If you’re uncertain or feeling overwhelmed, consider meeting with a bankruptcy attorney for assistance.

Are There Limitations on the Federal Homestead Exemption?

There are no specific limits on the federal homestead exemption, aside from the dollar limit. There are no restrictions based on your acreage or different exemptions for rural property versus urban property.

As long as you meet the basic requirements for the exemption, you can apply it as part of your bankruptcy case. These requirements are as follows:

• The property is your primary residence
• You must have lived in the state for at least two years leading up to filing bankruptcy
• You are a resident of the United States and are domiciled in the state where your property is located
• Each spouse must claim the exemption separately (only one needs to qualify)

Federal law is rather forgiving when it comes to the federal homestead exemption in bankruptcy, and there’s no age limit. There are also no minimum gross income requirements to take advantage of the exemption. As long as the house is your principal residence, you can apply the federal homestead exemption to the equity in your home.

Types of Property Eligible for the Homestead Exemption

The federal exemption applies to most types of real property, including a mobile home or a trailer. As long as you can prove that the property is your primary residence, you should be able to apply the exemption.

How To Claim the Federal Homestead Exemption

Claim the homestead exemption when you first file your bankruptcy petition. While you can always go back and amend your petition later, it can complicate things. To claim the federal homestead exemption in your New Jersey bankruptcy, you must take the following steps:

• File either your Chapter 7 or Chapter 13 bankruptcy petition and list your home as an asset
• Claim your exemption for your primary residence on your Schedule C forms
• Attach all supplemental documentation proving that the property is your principal residence (appraisal, property taxes, etc.)

The trustee will review your forms and supporting documents. If they approve the exemption, your home equity will be safe from an ordered sale. There’s a chance that the trustee will ask for proof that you are current on your mortgage payments. If not, you may want to wait to catch up before filing, if possible.

A Skilled New Jersey Bankruptcy Attorney Can Help Protect Your Home

It’s normal to be worried about what happens to your real property if you file bankruptcy. A skilled bankruptcy lawyer in New Jersey can help ensure that you protect your home using the homestead exemption. As an expert in both the federal Bankruptcy Code and New Jersey state law, an attorney can examine your situation, help you decide between Chapter 7 and Chapter 13, and make sure your filings are properly filled out.