Is Your Home Safe If You File Bankruptcy Alone? Why New Jersey Trustees Are Getting It Wrong

You and your spouse bought a home together. You hold it as tenants by the entirety—the way most married couples in New Jersey own their homes. Now, life has thrown you a curveball, and you need to file for bankruptcy. Your spouse doesn't. You've done your research, and you know that New Jersey law protects your home from your individual creditors.

So why is a bankruptcy trustee trying to sell it anyway?

This is happening right now in New Jersey bankruptcy courts, and frankly, it's outrageous.

What the Law Actually Says

In 2018, the New Jersey Appellate Division decided Jimenez v. Jimenez, a case that made crystal clear what many of us already believed: under N.J.S.A. 46:3-17.4, a creditor of only one spouse cannot force the partition and sale of property held as tenants by the entirety. Period.

This statute has been on the books since 1988. It says that neither spouse can "sever, alienate, or otherwise affect their interest in the tenancy by entirety during the marriage" without both spouses' written consent. The Jimenez court recognized this language for what it is—a shield protecting the marital home from one spouse's individual debts.

When you file bankruptcy in New Jersey and elect state exemptions, the Bankruptcy Code at 11 U.S.C. § 522(b)(3)(B) allows you to exempt your interest in tenancy by the entirety property "to the extent that such interest is exempt from process under applicable nonbankruptcy law."

New Jersey law, as confirmed in Jimenez, says it's exempt.

The Third Circuit has even held that filing bankruptcy doesn't sever a tenancy by the entirety. Your property interest remains intact.

Someone Got It Right: The Pennsylvania Bankruptcy Court

Here's what's frustrating: a Pennsylvania bankruptcy court already figured this out. In In re Wanish, 555 B.R. 496 (Bankr. E.D. Pa. 2016), a Chapter 7 trustee objected to a debtor's claimed exemption in a mobile home located in New Jersey that was owned with his non-debtor wife as tenants by the entirety.

The Pennsylvania court got it right. The court carefully reviewed N.J.S.A. 46:3-17.4 and concluded that under the clear language of the statute, creditors of one spouse cannot levy or sell property held as tenants by the entirety without the other spouse's consent. The court specifically noted that prior cases that reached the opposite conclusion had failed to properly consider the 1988 statute.

A Pennsylvania bankruptcy court, applying New Jersey law, protected a New Jersey family's home. Meanwhile, New Jersey bankruptcy trustees continue to ignore the same statute and the same logic.

So Why Are NJ Trustees Still Trying to Sell These Homes?

I actually do have an answer for this one: money.

When a bankruptcy trustee closes a case without liquidating any assets, they receive $60. That's it. Sixty dollars per file.

But when a trustee sells property? They receive a percentage of the estate that isn't protected by exemptions. And the attorneys and law firms they hire to pursue these sales? They get paid high hourly rates—also out of the estate.

So when a trustee looks at your home and decides to argue that your tenancy by the entirety exemption doesn't apply, ask yourself: is this about the law, or is this about their payday?

I recently had a case where a wife filed bankruptcy individually. She and her husband own their home together as tenants by the entirety. She properly elected New Jersey state exemptions and claimed the entireties exemption for her home. The trustee still moved to sell the property.

I find this practice not only legally questionable but morally troubling. We're talking about families' homes—the places where they raise their children, where they sleep at night, where they're supposed to feel safe. The law was written to protect these homes, and the courts have confirmed that protection.

The Problem No One Wants to Talk About

Here's the cruel reality: fighting this issue takes resources. And who wants to risk losing their home to establish a legal precedent?

That's exactly why this keeps happening. Trustees know that most people will settle, give up equity, or find some way to make the problem go away rather than appeal. The families who could challenge this practice are the same families who have the most to lose if the fight drags on.

What You Can Do

If you're a married homeowner in New Jersey with individual debt, I want you to think carefully about your options.

Consider alternatives to bankruptcy first. Debt settlement, negotiation with creditors, or even just a structured repayment plan might make more sense than dealing with a trustee who ignores the law. Credit counseling, debt management plans, and strategic negotiation can resolve debt without the risks we're seeing in bankruptcy court.

But if you want to fight? I believe the law is on your side.

The statute is clear. Jimenez confirmed it. The Pennsylvania bankruptcy court in Wanish applied it correctly. The problem isn't the law—it's that New Jersey bankruptcy trustees and some bankruptcy and district courts have been getting it wrong. The Third Circuit Court of Appeals is the path to finally straighten this out.

The Bottom Line

The law is supposed to mean something. When the New Jersey Legislature passed N.J.S.A. 46:3-17.4 in 1988, they intended to protect married couples' homes from one spouse's creditors. When the Appellate Division decided Jimenez in 2018, they confirmed that intent. When the Pennsylvania bankruptcy court decided Wanish, they applied it correctly.

If you're facing this situation, explore your alternatives first—debt settlement and negotiation may be the smarter path. But if you decide this is a fight worth having, I'm licensed to practice before the United States Court of Appeals for the Third Circuit, and I'm prepared to take it there.

Your home deserves to be protected. The law says it should be. Let's make sure it is.