How to Stop a Sheriff’s Sale in New Jersey

If you live in New Jersey, what do you do when a creditor is trying to proceed with a sheriff’s sale of your house?  This question will be addressed under the context of bankruptcy law – that is, if you file a petition for relief in bankruptcy court.

A lawyer will help you to determine what sort of bankruptcy protection you should seek.  Many homeowners seek to save their home by filing for Chapter 13 relief.  Under this plan, the debtor may seek to have their debts reduced and to arrange a court-approved payment plan where outstanding debts may be repaid, including a past-due balance on a mortgage.  In this way, a pending sheriff’s sale may be suspended by a bankruptcy court, since creditors are not permitted to proceed with collection efforts without leave from the court once you file for bankruptcy.

Call our New Jersey bankruptcy attorneys at Young, Marr, Mallis & Associates at (609) 755-3115 for a free case review.

Chapter 7 vs. Chapter 13 Bankruptcy for Ending a Sheriff’s Sale in NJ

Chapter 13 relief may be contrasted with a Chapter 7 petition, in which the debtor seeks to have their debts liquidated (or eliminated) by the court.  However, a Chapter 7 petition will likely not permit you to retain the house for which you are seeking to eliminate the debt.

You are asking the court to liquidate as many of your debts as possible.  So, in exchange for cancellation of the mortgage debt, the borrower will likely have to give the house up to the lender to whom the mortgage debt is owed.  The mortgage company also usually takes a lien on the house superior to all others.  This is why Chapter 13 bankruptcy is often best for homeowners who wish to stay in their homes but who can no longer afford their mortgage payments or who fell behind on payments.

Using Bankruptcy’s Automatic Stay to Stop Sheriff’s Sales in NJ

If you file for bankruptcy, all collection efforts by creditors – including that sheriff’s sale – must halt unless the court rules otherwise.  A halt to all collection – called an automatic stay – goes into place when you file for bankruptcy.  To proceed with collections, a creditor must file a motion for relief from stay with the bankruptcy court.

A motion for relief from stay essentially means that the creditor wants to proceed with collection attempts just as it had been doing before the debtor filed the bankruptcy action.  The court must consider whether it would be legally unfair to the borrower to continue collections, whether the creditor would receive an unfair advantage if collections are resumed, and how likely it is that the creditor can actually prove that the borrower owes the claimed amount.  If the court rules in favor of the creditor on these questions, the court will then grant the creditor relief from the automatic stay and let the creditor proceed with collections.

Other Ways to Stop a Sheriff’s Sale in New Jersey

If the bankruptcy court allows the creditor to proceed with a sheriff’s sale of the property, or if the sale happened prior to the bankruptcy petition being filed, there are still ways in which you may recover the property rights to your home by paying the past due balance, curing the default, objecting, and seeking injunctive relief, as described below.

Redemption

Under New Jersey law, a borrower has ten days following a foreclosure sale to “redeem” their property rights, and the Bankruptcy Code extends the redemption rights 60 days from the date the bankruptcy petition is filed. And in order for a borrower to redeem their property rights following a sheriff’s sale, they must pay the mortgage past due balance, the costs of the foreclosure action and costs of the sale.

Curing Default

If you have filed for Chapter 13 relief, New Jersey law states that you have the right to cure any default under the plan up until your home is purchased at a sheriff’s sale.

Objections

There is also a 10-day period following a sheriff’s sale in which a borrower is entitled to file objections to the sale and potentially reverse it.  However, a bankruptcy filing does not automatically serve as an objection that will be legally recognized in response to a sheriff’s sale.

Injunctive Relief

You can also seek an injunction, which is a court order to stop another party from taking certain actions or force them to perform certain actions.  The claimant typically asks that an injunction be entered at or near the beginning of a case, which often requires a hearing.  Before a claimant can receive injunctive relief in New Jersey, they must convince the court that they are likely to win your case in the end.  The claimant must also persuade the court that there is no other legal relief that can remedy the situation while the case is pending, and that an injunction would be eminently fair under the circumstances.  Additionally, the claimant must show that they will suffer “substantial and imminent hardship” if the court does not grant an injunction.

The court considers the benefits and harm to both the claimant and defendant that would result if the injunction were granted.  Then the court determines whether there is any other solution to the problem besides granting an injunction.  Finally, the court decides whether the public at large would be harmed in any way if the injunction were granted.  If the court decides in the claimant’s favor on these questions, an injunction may be granted which will stop the sheriff from proceeding with a sale, either temporarily or permanently.

Call Our New Jersey Bankruptcy Attorneys Today

Call our New Brunswick, NJ bankruptcy attorneys at Young, Marr, Mallis & Associates at (609) 755-3115 for a free case review.