If you own a home when you file for bankruptcy, it becomes part of the bankruptcy estate, the property or assets you own. In October of 2022, there was a twenty-seven percent increase in chapter 13 bankruptcy filings over the previous year. Bankruptcies, including all chapters, total a seven percent increase overall, which correlates strongly with the seven percent increase in inflation. Many homeowners are overwhelmed by their debt. As financial issues due to circumstances beyond their control changed their ability to pay creditors, they find they have no option but to claim bankruptcy, which can stop a foreclosure on their primary residence.
Those with secured and unsecured debts totaling less than $2,750,00 are eligible for chapter 13. However, chapter 7 is a liquidation process in which the trustee sells your assets to pay debts based on your total income, debt, and ability to repay. Often, these homeowners want to sell their houses to solve at least some of their financial difficulties but wonder if it is possible during bankruptcy proceedings.
While the rules for the process may differ for the type of bankruptcy you file under, and many factors influence the final determination, for most homeowners, the short answer is yes. So read on as we explore how to sell your house during bankruptcy in New Jersey. Please note that this article is for informational purposes, not financial or legal advice.
Filing for bankruptcy doesn’t mean you’re stuck in your current home forever. In fact, many homeowners discover that selling their house during bankruptcy is the single smartest move they can make to regain control of their finances. With Chapter 7 and Chapter 13 filings climbing—up 16.2 percent nationwide in the year ending September 2024 uscourts.gov—and New Jersey posting one of the highest foreclosure rates in the country (1 in every 267 homes faced a filing in 2024) resimpli.com, understanding your options has never been more urgent.
In this guide you’ll learn:
- How Chapter 7 vs. Chapter 13 affects a home sale
- The exact steps to get court approval and protect your equity
- Real-time New Jersey market data that can shape your decision
- Why a direct cash offer from We Buy NJ Real Estate, LLC often beats a traditional listing
- Straight-shooting answers to the most-googled questions on the topic
Important: This article is for educational purposes only. Always consult a qualified bankruptcy or real-estate attorney for personalized advice.
Why consider selling while in bankruptcy?
- Stop foreclosure in its tracks
- Convert ill-liquid equity into cash to satisfy creditors
- Potentially shorten or satisfy your Chapter 13 repayment plan
New Jersey’s median home value hit $563,670 in March 2025—up 5.7 percent year-over-year zillow.com. If your New Jersey property has appreciated similarly, selling now could deliver enough proceeds to cover arrears, shrink your plan, or even help you exit bankruptcy early.
2. Chapter 7 vs. Chapter 13: What’s at stake?
| Feature | Chapter 7 (Liquidation) | Chapter 13 (“Wage-Earner” Plan) |
|---|---|---|
| Trustee’s role | May initiate sale if unprotected equity exists | Debtor controls sale but must modify plan |
| Homestead exemption | Trustee pays you exempt amount; rest to creditors | You keep exemption; excess goes toward plan payments |
| Timeline to sell | Quick—trustee aims to liquidate assets fast | Flexible—up to 3–5 years but court can approve sooner |
| Who files the motion? | Trustee (typically) | Homeowner (debtor) |
Key takeaway: Under Chapter 7 the sale often moves faster but you surrender control. Chapter 13 gives you a say, yet every dollar of equity above your exemption must feed the repayment plan.
Step-by-step guide to selling your house during bankruptcy in New Jersey
- Consult your attorney early
– Verify your exact equity after updated appraisals and New Jersey’s homestead exemption. - File a “Motion to Sell Real Property”
– Include proposed sale price, estimated net proceeds, and a list of lien-holding creditors.
– Creditors and your trustee receive notice and may object. - Add a bankruptcy contingency to the purchase contract
– States the sale closes only if the court approves. - Request an itemized payoff statement
– Confirms mortgage balance, accrued interest, legal fees, and any trustee surcharges. - Secure court approval
– Judges usually rubber-stamp arm’s-length transactions that yield fair market value or better. - Close and disburse funds
– Title company issues checks: first to mortgage holders, next to you (up to exempt cap), remainder to unsecured creditors or Chapter 13 plan administrator.
New Jersey snapshot: Why timing matters
- Limited supply, strong demand: New Jersey’s inventory sat at just 2.1 months in Q1 2025, keeping seller leverage high.
- Foreclosure pressure rising: State foreclosure filings jumped 22 percent in March 2025 alone prnewswire.com. Acting before formal foreclosure can preserve more equity.
- Interest-rate uncertainty: The Federal Reserve signaled two possible rate hikes this year, which could chill buyer demand later in 2025.
Translation? If you’re in Chapter 13 and on the fence, an early-2025 sale may net you more—and speed up the end of your repayment plan.
Cash vs. conventional listing—why We Buy NJ Real Estate, LLC makes bankruptcy sales painless
| Pain Point | Traditional Listing | Direct Sale to We Buy NJ Real Estate, LLC |
|---|---|---|
| Showings & repairs | Must declutter, stage, and fix issues—costly upfront | Sell as-is. We buy even if you’re mid-bankruptcy |
| Court approval window | Buyer might walk if delays drag | We coordinate with your trustee for guaranteed closing |
| Fees | 5–6% agent commission + 2–3% closing costs | $0 commissions or closing fees |
| Certainty | Deal can collapse over financing | All-cash. No lender, no appraisal risk |
| Timeline | 30–90+ days | Close on your timeline—often within 14 days |
Why it matters to you: The court favors offers that minimize risk and maximize net proceeds. A verifiable, no-contingency cash offer from We Buy NJ Real Estate, LLC checks every box—simplifying approval and ending creditor calls faster.
FAQs About selling a house during bankruptcy
| Query | Answer |
|---|---|
| “Can I sell my house while in Chapter 13 bankruptcy?” | Yes. You must file a motion with the court and usually apply sale proceeds to your repayment plan, which may shorten or satisfy it. |
| “Do I keep any money if I sell in Chapter 7?” | Only up to New Jersey’s homestead exemption—currently $25,150 for individuals (double for married couples filing jointly). Any equity above that goes to creditors. |
| “How long does bankruptcy court approval take?” | Typically 30–45 days from filing the motion, but having a clean, all-cash contract can expedite the process. |
| “Will selling stop foreclosure immediately?” | Filing Chapter 7 or 13 triggers an automatic stay that pauses foreclosure. Selling before the stay lifts preserves equity and may fully settle mortgage arrears. |
| “Is a realtor required?” | Not legally. Many owners opt for a direct-to-investor cash sale to avoid commissions and delays—something We Buy NJ Real Estate, LLC specializes in for bankrupt sellers. |
7. The We Buy NJ Real Estate, LLC advantage—local experts, real solutions
Because We Buy NJ Real Estate, LLC is rooted in New Jersey, we track neighborhood-level sales daily and understand bankruptcy timelines inside out. Our seasoned cash buyers will:
- Provide a written, fair-market offer within 24 hours—valid for 30 days so you can run it past your attorney and trustee.
- Supply court-ready paperwork—including motion templates and net-sheet breakdowns—for a streamlined approval process.
- Cover all closing costs and never charge commissions, saving you an average of $30,000 on a $500k home.
- Close as fast as the court allows or at a date you choose—even if that’s 90 days out to match plan modifications.
Turn bankruptcy into a new beginning
Selling your house during bankruptcy in New Jersey isn’t a last-ditch gamble—it’s a strategic move that can wipe out debt, protect your equity, and put you back on stable financial ground. With rising bankruptcy and foreclosure activity across New Jersey, timing is critical. A swift, transparent cash offer from We Buy NJ Real Estate, LLC lets you satisfy the court, silence creditors, and move forward—without agents, repairs, or hidden fees.
Ready to talk options? Call We Buy NJ Real Estate, LLC at (908) 320-7995 or fill out our form for a no-obligation cash offer today. Your fresh start could be one signature away.