NJ Homestead Exemption-Tenancy by the Entirety

[TITUS00]

The New Jersey Homestead exemption states "survivorship interest of a spouse in property held as tenancy by the entirety is exempt from creditors of a single spouse"

If I file for CH 7 it will be solo, both my wife's and my name are on the deed to our house. What does the NJ Homestead exemption do in regards to calculalating the equity in my home?

[aljohnson007]

TBE will protect your home as long as you both are on the deed as "husband and wife" AND the debts are all yours alone. If debts are co-owned, TBE does not protect you from a creditor. Some States only allow TBE for homesteads while here in Florida, the home and all personal property, including bank accounts and vehicles, can be exempt if titled property. If you have an attorney, you should have NJ law explained and if you are filing pro se, research the NJ Statues re TBE.

[lrprn]

If I file for CH 7 it will be solo, both my wife's and my name are on the deed to our house. What does the NJ Homestead exemption do in regards to calculalating the equity in my home?

As far as calculating the current equity in your home, you need a reliable CURRENT estimate of the value of your home. To get a quick idea of this, take a look at similar properties in your area that have sold in the last six months. If this is a close call in your case, then have a professional assessment of value done. The equity is the current value minus whatever loan amount(s) remains to be paid on your home mortgage(s).

Here's a good explanation of tenancy by the entirety:
"Tenancy by the entirety is a special kind of property ownership that's only for married couples in a handful of states. With tenancy by the entirety, both spouses have the right to enjoy the entire property. In the event that only one files bankruptcy and property is held in both names, then the property is 100% protected. If both file bankruptcy, however, the property is not protected and may be liquidated to pay back any unsecured creditors. ... Tenancy by the entirety property ownership rights apply to all debts except IRS tax debt." ...

"The rationale of a Tenants by the Entirety is that it would be patently unfair to the non-debtor spouse to force a sale of the primary residence to satisfy a debt the non-debtor spouse did not incur. However, this does not prevent the creditor from placing a judgment lien on the property - just from forcing the liquidation of the property to exercise the lien. This leads to the downside....if the non-debtor spouse dies, sole title to the property by operation of law passes to the debtor spouse; if the debtor spouse has sole title to the property, there is no bar to the creditor forcing the liquidation of the property to satisfy the judgment. This means that Tenancy by the Entirety can be an extremely effective asset protection plan - but only if there is never a divorce or death of the non-debtor spouse."(from http://www.franklindebtrelief.com/te...-entirety.html)

Bottom line is that if both you and your wife signed the deed and mortgage(s), then filing bankruptcy prevents your trustee from liquidating the home to pay your creditors even if you have more equity than is allowed by exemptions. However, if divorce or death occurs, the trustee can use that to force the sale of the home and creditors can still place judgment liens on the home which can also force its sale.

Hope this helps.

[TITUS00]

I guess this raises another question. If I file CH 7 will creditors be able to put liens on my house. Also how long after a CH 7 can a trustee force liquidation due to death or divorce?

[lrprn]

I guess this raises another question. If I file CH 7 will creditors be able to put liens on my house.

Creditors cannot put liens on your house as long as you and your wife are together.

Also how long after a CH 7 can a trustee force liquidation due to death or divorce?

First, let's hope and pray that neither one happens in your life. In the unlikely event that one might, then you would contact your lawyer right away. If the trustee would be interested in taking the house, how long that might take is anyone's guess.

Reading back through the thread, you didn't share how much equity you have over what NJ's or the federal homestead exemption allows. Which exemptions (NJ or federal) do you plan to use? Do you have too much equity to protect the house completely on your own using those exemptions? If yes, how much home equity would be unprotected?

[TITUS00]

I had a RE agent due a comp analysis in June. She said the house is worth 300K. I owe 269K paying a first and second mortgage. NJ has no homestead exemption, but I can use the Federal exemption which I believe is $20500. This will leave 11K unprotected. Does the trustee factor in the cost of selling the house when making the determination of if to liquidate?

[backtoschool]

Wouldn't only half the equity be yours since your wife's name is on the deed and she is not filing?

I think your individual equity is covered by the federal exemption.

[TITUS00]

I would like to confirm if indeed my individual equity in the house is covered.

[backtoschool]

Since New Jersey is not a community property state, you would only have half the equity in the house under your assets. Your wife would have the other half. So, your half of the equity would be covered by the federal homestead exemption.

[TITUS00]

I believe you are correct. Can anyone else confirm this, it would be a relief to me.