In the aftermath of the 2008 financial crisis, many people have found themselves facing foreclosure wondering what their options are. When a secured lender files for foreclosure, the end game (unless a modification is entered into between the parties) is for the secured lender to take the property to sheriff sale. This blog will explore the impact of a sheriff sale and your options through the bankruptcy code that are at your disposal.
New Jersey Is a Gavel Rule State
In the State of New Jersey, you have an ownership interest in your property until the property is sold at sheriff sale. The gavel rule is a reference to the gavel hitting a surface with the person conducting the auction stating that the property is sold at the conclusion of bidding. Once the property has been sold, ownership has been terminated. The owner will then have a statutory redemption period in which to redeem the house from the purchaser in full. At this point, if the former owner still remains in possession of the property, the successful bidder at the sheriff sale will then have to move to evict the former owner as a tenant in an eviction proceeding.
Filing Chapter 13 Bankruptcy Prior to the Sheriff Sale
If you would like to try to keep the property through a chapter 13 bankruptcy proceeding in the state of New Jersey, then it is important that you file your chapter 13 bankruptcy prior to the sheriff sale taking place. The filing of the bankruptcy proceeding prior to the sheriff sale will stop the sheriff sale from taking place by virtue of the automatic stay coming into effect pursuant to 11 U.S.C. § 362. The automatic stay prevents all creditor collection efforts from continuing once it is in effect. However, if the bankruptcy proceeding is filed after the sheriff sale takes place, then your options will be severely limited in what the bankruptcy code can do for you to help you keep your home. In a chapter 13 bankruptcy proceeding for a residential property, you would have the opportunity to enter into the loss mitigation program to try to obtain a loan modification or you can pay your arrears over time while also maintaining your ongoing mortgage payments.
Filing for Chapter 13 Bankruptcy After the Sheriff Sale
If you were not able to file your chapter 13 bankruptcy proceeding prior to the sheriff sale, then you will be limited to the extension of time provided by 11 U.S.C. § 108(b). Under this section of the bankruptcy code, the Debtor will have sixty days from the filing of the bankruptcy petition to redeem the house from the purchaser as long as the period for redemption has not expired prior to the bankruptcy filing. The reason that your options are not expansive in bankruptcy once the sheriff sale occurs in New Jersey is because property rights in bankruptcy are defined by state law.
Filing For Chapter 7 Bankruptcy Prior to the Sheriff Sale
If you are facing a sheriff sale and would like to file a chapter 7 bankruptcy, then it is important to realize that the chapter 7 proceeding itself will not help you keep your property. Chapter 7 bankruptcy is the liquidation chapter of bankruptcy rather than chapter 13, which is for personal reorganization. From a practical standpoint, the benefit of filing a chapter 7 bankruptcy prior to the sheriff sale would be to delay the proceeding, which would buy you some more time to evaluate your options. However, once the case closes or the creditor obtains relief from the automatic stay, then the sheriff sale would be able to proceed with the foreclosure.
Help from a New Jersey Bankruptcy Attorney
If you find yourself in this position, it is important to contact an experienced New Jersey bankruptcy attorney to guide you through your options. If you have questions regarding a potential bankruptcy, call the law firm of Scura, Wigfield, Heyer, Stevens & Cammarota, LLP for a free consultation.
Whether you need to completely eliminate your debt through Chapter 7 bankruptcy, or need to reorganize your credit payments through Chapter 13 or Chapter 11, we are well qualified as a full-service bankruptcy law firm for people in these and other New Jersey counties: Passaic County, Hudson County, Essex County, Bergen County, Morris County, and Sussex County. Call us today at 973-870-0434 or toll free 888-412-5091.