Bankruptcy Can Help New Jersey Homeowners Avoid Foreclosure

New Jersey second quarter foreclosure statistics were recently released. At first glance, the results appear encouraging. The overall number of New Jersey foreclosure sales decreased from last year by 40 percent. During the second quarter, one out of 11 New Jersey home sales involved a foreclosed property, in contrast to one in four nationwide.

However rosy the numbers look, experts say that the apparent statistical decrease in mortgage foreclosures is likely not due to a decrease in the actual number of properties in foreclosure, but to the long foreclosure process that New Jersey law requires.

Experts say that this long process can cause misleading foreclosure statistics. Unlike in other states, lenders have to go to court to foreclose on a property in New Jersey. It involves a long legal process that slows down the rate of foreclosures considerably. Specifically, the requirement of going to court makes the foreclosure process take an average of more than two and a half years to complete.

It can be argued that the lengthy foreclosure procedures benefits homeowners who are behind on their mortgages, because it delays the seizure of their house. However, experts say that the foreclosure delay also works to keep housing prices low, because it creates an abundance of properties in foreclosure that will eventually be sold on the housing market.

Experts say that once these properties in foreclosure eventually complete the foreclosure process, they will be sold at low prices, ultimately driving down home prices. Recent statistics suggest that this is already happening, as New Jersey home values declined by 0.8 percent in July. In contrast, home values increased in many other states during this time.

Bankruptcy Can Help

For New Jersey homeowners who are behind on their mortgages but have a regular income, Chapter 13 bankruptcy may be a viable solution. Unlike Chapter 7, which merely delays the foreclosure process, Chapter 13 allows the homeowner to stay in his or her home.

Under Chapter 13, homeowners can pay off any mortgage arrearages according to a payment plan. Since the payments that are made under the payment plan can be spread out over a period as long as five years, it can make catching up on mortgage payments affordable. As long as the homeowner makes timely and regular payments according to the terms of the payment plan, bankruptcy law prevents lenders from proceeding with foreclosure.

Chapter 13 can also help homeowners who are having trouble paying a second or third mortgage on their home. If the bankruptcy court determines that because of falling home values, that the value of the home is less than the balance of the first mortgage, the court may be able to strip off the second or third mortgage and release the homeowner from any obligation to make payments.

Bankruptcy is one of the several debt relief options that New Jersey homeowners have. As the law in this area is complicated, if you are facing foreclosure, it is important to contact an experienced bankruptcy attorney. An attorney can advise you of your debt relief options and recommend the best course of action for your individual situation.