Due to the volatility of today’s economic climate, most states have some type of homestead protection laws that allow people to stay in their home by protecting some or all of the equity in their primary residence -- usually in instances of bankruptcy or action on the part of creditors. The idea behind these laws is that no one should be made homeless due to a reversal in financial stature.
You should know that New Jersey state law, however, does not offer homestead protections. Instead, New Jersey homeowners who seek homestead protections may do so through the federal government (up to $22,975 -- though this amount is adjusted every three years. In general, New Jersey homeowners would receive homestead protection by filing for chapter 7 bankruptcy and using federal exemption statutes. In the case of a chapter 7 bankruptcy, the equity in a home is generally considered to be an asset that can be used to pay creditors. “Equity,†in this case, refers to:
 [Overall Value of the Home] - [Mortgage Balance]
Therefore, if you have less than $22,975 of equity in your home, the federal homestead exemption protects your home from being sold to pay debts. If you have more than $22,975 of equity, the bankruptcy trustee can sell your home and pay off your creditors with the money from the resulting sale (though you will get to keep the $22,975 exempted by federal law).
| Code Section | n/a (New Jersey has no homestead laws, but homeowners may apply for federal homestead exemptions) |
| Max. Property Value That May Be Designated 'Homestead' | - |
| Maximum Acreage (Urban) | - |
| Maximum Acreage (Rural) | - |
Note: State laws are constantly changing -- contact a New Jersey real estate attorney or conduct your own legal research to verify the state law(s) you are researching.
More Information
For more information on homestead and bankruptcy-related issues in New Jersey, click on the links to additional resources that are listed below. You may also want to look at FindLaw’s general explanation of homestead protection laws, or FindLaw’s sections on real estate law and bankruptcy law. Finally, given the high stakes involved in these types of situations (i.e. the potential loss of a family home), you might consider hiring or retaining a real estate lawyer or bankruptcy lawyer, depending on your circumstances.
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New Jersey Homestead Laws: Related Resources
