sheriff sale

June 25, 2016 by Todd Murphy

Luke, 42, and Bridgette 42, With Very Limited Options, Moved On With A Fresh Start: A Foreclosure Case Study

Luke took a step back and reality set in that his home was finally going to be sold at a sale and he and his family would have to move from their home of 10 years: if he didn’t take any action, he would have to move without time to prepare and he would owe the IRS $120,000 in income taxes.

Luke was making $350,000 a year as a custom homebuilder, but one day, all of the client calls stopped.

In this foreclosure case study, we hear about Luke who worked as a new homebuilder for 22 years. He started his own business when he was 20 years old and built a large client base in Bergen County. He earned consistently upwards of $350,000 most years and was able to buy a great lot and build a beautiful home for his family.

The demand for new homes was growing at a seemingly unstoppable pace. But all of this changed when the housing market took an enormous hit in 2008. Overnight, Luke went from getting 15 calls a week from potential clients to 0. No one was buying new homes and 10 years later, they still aren’t.

Depressed, hopeless, and broke, Luke didn’t know where to turn.

Luke felt distraught, he had a wife, Bridgette, who was a stay at home mom, and 3 kids to provide for– 2 of which were already in high school and soon going off to college.

Months past and Luke still wasn’t getting any calls. He felt hopeless, his wife started to resent him for not being able to provide for the family and told him to “get a job!” Luke was depressed and this only made matters worse because his kids were upset that he was withdrawn and not spending time with them anymore.

Pro Tip: Don’t get down on yourself after losing your job or if you can’t find good-paying employment right away again. The job market is tough for people, men in particular, over the age of 45. But don’t give up, there is a light at the end of the tunnel.

Luke noticed the way that his wife and kids looked at him differently and saw the pain in their eyes. He knew that completely disengaging himself from his family was not beneficial to anyone, but he couldn’t look at them without being reminded of the guilt and feeling like he failed them as a husband, father and provider.

Mortgage payments went unpaid, his kids’ college funds and his savings were depleted and Luke had just received foreclosure papers.

Luke made an effort to try and fix his home and situation, but this didn’t come as easily to him as fixing others’ homes. He transitioned his business into focusing on general home improvement, but still struggled to find work. Home prices had not turned around enough to the point where people wanted to have work done on their homes.

Pro Tip: No noe has a crystal ball but try be realistic and assess your job situation with an honest outlook; knowing the state of the housing market and economy, Luke should have formulated a way to transition out of the home business sooner.

Within a year, Luke had used all of the money he had saved, and the money he set aside for his kids’ college funds to try and pay the bills. He also maxed out all of his credit cards. Once all of this was exhausted, Luke couldn’t pay the mortgage any longer. He soon received foreclosure papers in the mail.

Pro Tip: Don’t go into a frenzy after receiving foreclosure papers. The foreclosure process typically takes many months in NJ. But, don’t take a do-nothing attitude, use this time to take action and develop a strategy. Taking action early on will get you the best outcome.

He couldn’t go on living like this any longer. Bridgette acted like she hated him and his kids had become apathetic; they didn’t say, “I love you” anymore and looked at him with confusion and pity. And now to top it all off, Luke got notice that the sheriff sale was scheduled; he was terrified that he and his family would be kicked out their home within a few days.

Pro Tip: It is easier said than done, but, try not to let your financial problems create strife and a divide within your family. It is much easier to work through these harder times as a team. So often, spouses beat each other up instead of trying to develop strategies and goals together, and unfortunately it is easy to overlook how that behavior affects the family as a whole.

Luke was desperate to find out what options he had.

He needed to find someone to help him. After doing research online, he came across a lawyer who could help him with a foreclosure. His Google search led him to Todd Murphy. After an in-depth phone call, in which they carefully looked at all of the possibilities, Mr. Murphy regrettably informed him that he was too far behind in payments and didn’t make enough money to qualify for a loan modification or a chapter 13 bankruptcy. These were the tools that would’ve allowed Luke to get the most desirable outcome if he wanted to save his home.

A loan modification could’ve allowed him to pay back his missed payments with a new term and interest rate. Or, a chapter 13 bankruptcy could’ve allowed him to pay back his missed payments and start making normal payments… but neither option worked because he had waited too long and wasn’t making enough money.

A loan modification would have taken the total of the missed payments and added them to the principal balance; this would have given him a new term and interest rate, so he could begin paying back what he owed on his home. But, he didn’t make enough money to qualify. The chapter 13 bankruptcy would have combined the missed payments and the normal payments; he would have been paying this back within 60 months. The chapter 13 bankruptcy was impossible though because Luke waited too long and the new combined monthly payments would’ve been way too large to manage with his minimal income. It wouldn’t be possible to save Luke’s home; Mr. Murphy suggested a chapter 7 bankruptcy as the next most viable solution.

Pro Tip: A debt to income ratio test must be done to see if you qualify for a loan modification; and an analysis must be done to see if you qualify for a chapter 13 bankruptcy. For a loan modification, you must have the right ratio of income to expenses, and for a chapter 13 bankruptcy you must have enough income to make the combined monthly payments (your arrears and current monthly payments combined). Each option takes into account how many missed payments you have.

Why Would A Chapter 7 Bankruptcy Be A Good Option?

Luke was concerned about getting thrown out of his home the day the home was sold at the sheriff sale. Mr. Murphy explained that, after the sale, the new owner (often the bank) would have to use the courts to evict Luke and his family as if they were tenants not paying their rent– this would take upwards of 90 days. With a chapter 7 bankruptcy, three more months could be added to the time they could stay in the home and if they took their 30 day adjournment of the sale first, that would get them a total of 7 months more than they originally thought.

Pro Tip: Most people would be disappointed at the prospect of moving, but it is important to remember that you have had the great benefit of living for free for a number of years.

From a financial standpoint, if they didn’t do a chapter 7 and their home was sold at a sheriff sale, Mr. Murphy explained that because the sale price would not cover the amount they owed on the home, that amount would be forgiven. Once it’s forgiven, the IRS treats that amount as taxable income. The amount of forgiveness would be taxed at the highest rate. They determined that if Luke’s home was sold at the sheriff sale for $500,000 and the loan balance was $750,000, he would end up owing the IRS over $120,000 in taxes. So, not only would he lose his home but he would then end up with a debt to the IRS he could never repay. But, if they followed through with a chapter 7 bankruptcy, the debt would be discharged and they would not owe any taxes on it.

Pro Tip: A chapter 7 bankruptcy can be a great tool in helping you avoid tax liabilities.

Mr. Murphy noted the other important benefit of the chapter 7 is that it would leave Luke debt-free. Over the course of the last several years, Luke had run up massive credit card debt; but the chapter 7 bankruptcy would discharge all of this.

The idea of bankruptcy didn’t sit well with Luke or Bridgette, but if they didn’t file for one, the consequences would be disastrous.

Despite all of this, the word bankruptcy left a bad taste in Luke’s mouth. That was the last thing he wanted to consider; all he knew about bankruptcy were the bad things. But, after hearing the good that could come from it and how it could help them discharge all of his debt, buy a little extra time in his home so they could find a new place and pack everything up properly, AND avoid tax liabilities, he discussed it with Bridgette that night; like Luke at first, she was incredibly upset to hear this as an option. But after it sunk in, they both agreed bankruptcy, with the benefits of putting the past behind them and giving them a fresh start for the future, might be their only good option left. This slowly turned into the first fruitful conversation they had in months. Over the course of the next week they went over the pros and cons of filing for a chapter 7.

Pro Tip: Many people attribute a bad reputation to bankruptcies, but what they don’t know is that bankruptcy can actually have a lot of benefits. If you can’t save your home, a chapter 7 bankruptcy can help you avoid tax liabilities, clear your debts, save money and rebuild your credit, and provide you with time to plan before the sheriff sale; it can give you a fresh start and a good alternative if you can’t save your home.

They decided that the good outweighed the bad, a bankruptcy was the right way to go.

Luke and Bridgette decided that the good attributes outweighed the bad, and that the chapter 7 bankruptcy would be the best way for them to try and recover and repair their situation before the sheriff sale happened. Their relationship finally began looking up, they realized that all of their marital troubles the were facing recently were rooted in the stress of not knowing what to do and not having a plan in place. But, soon, they would be over.

They broke the bed news to their kids, that they would have to move out of their current home, but told them they were able to formulate a new plan for the future and things were going to better very soon. They saved as much money as they could and worked on rebuilding their credit before the time of the sheriff sale, all while living in their home for free for another 7 months until the bank finally offered them $5,000 “Cash for keys.”

Pro Tip: At times, the new buyer of your home will harass you; once the home is old, the buyer now legally owns the home and is allowed to enter the property as a landlord. This is important to keep in mind while living at your home after the sheriff sale.

This was enough time for Luke to put some money away in the bank, and gave Bridgette enough time to find a job. They worked as a team and were finally able to communicate with each other again. Luke started spending more time with his kids and rebuilt his relationship with them.

Pro Tip: Sometimes buyers will also offer what’s referred to as “cash for keys.” If the buyer wants to move into their new home right away, they may be willing to pay up to $3,000-$7,000 for you to move out; this money can be helpful in securing your first month’s rent at a new location. And helping you get back on your feet.

By the time 7 months had past, Bridgette and Luke had saved around $8,000 and, along with the $5,000 cash for keys money, were able to find a nice home to rent. It was a huge change for them, but they stuck together and leaned on each other for support.

Pro Tip Summary:

Timing is everything. As time goes on, without taking any action, your options become very limited.
If you can’t save your home, chapter 7 bankruptcy can allow you to discharge debts, avoid tax liabilities, live for free, buy you time, and even get you “cash for keys.”

July 13, 2015 by Todd Murphy

Do I Have To Pay Tax After A Short Sale?

Great! You did a short sale and now your mortgage lender sent you a 1099C to pay income tax on the amount of the loan that was not paid at the sale. What? Do you have to pay tax after a short sale?

Answer: maybe.

The IRS treats forgiven or cancelled debts as income. Under IRS rules, the lender is required to notify the IRS and to send you a form 1099C which may obligate you the pay income tax on the forgiven amount when you prepare your taxes for the year of the short sale. Let’s say you had a home mortgage loan where you owed $350,000 and the lender approved a short sale for $250,000. In approving the sale, the lender is also agreeing to take $250,000 (less expenses) as full payment on the loan. That means $100,000 of the loan is forgiven. The IRS looks at this forgiveness as income and wants you to pay tax on it.

There Are Exceptions That May Apply To You.

Waiver By Congress. Up until December 2014, Congress provided a waiver of the tax given the high number of home owners that were losing their homes after the financial crisis of 2008 but that law hasn’t been renewed at this point. You may want to check to see if Congress has renewed the waiver but at this point, it does not appear likely.

IRS Rules. You may need the help of your tax preparer or accountant but here’s what the IRS has to say about forgiven or cancelled debts. In IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments, the IRS explains the federal tax treatment of canceled debts in certain situations. In short, if you are Insolvent in the eyes of the IRS, you do not have to pay the tax.

Insolvency. If you are insolvent according to the IRS just before the debt was cancelled, this exception may apply to you.

In Publication 4681, the IRS provides: Do not include a canceled debt in income to the extent that you were insolvent immediately before the cancellation. You were insolvent immediately before the cancellation to the extent that the total of all of your liabilities was more than the fair market value (FMV) of all of your assets immediately before the cancellation. For purposes of determining insolvency, assets include the value of everything you own (including assets that serve as collateral for debt and exempt assets which are beyond the reach of your creditors under the law, such as your interest in a pension plan and the value of your retirement account). Liabilities include: The entire amount of recourse debts, the amount of nonrecourse debt that is not in excess of the FMV of the property that is security for the debt, and, the amount of nonrecourse debt in excess of the FMV of the property subject to the nonrecourse debt to the extent nonrecourse debt in excess of the FMV of the property subject to the debt is forgiven.

A special note if you have retirement savings: 401(k)s and IRAs count toward your assets. Please note that in the above guideline, the IRS does not exclude retirement savings from your assets. This may prevent some people from qualifying for this exception. If you do have retirement savings, it is important to know that that retirement savings is exempt from assets in bankruptcy so in this case, bankruptcy may be a better option for you in that it saves you the tax and preserves your retirement savings.

Bankruptcy. If you file for bankruptcy, whether chapter 7 or chapter 13, the bankruptcy exception may apply to you.

In Publication 4681, the IRS provides: Debt canceled in a title 11 bankruptcy case is not included in your income. A title 11 bank- ruptcy case is a case under title 11 of the United States Code (including all chapters in title 11 such as chapters 7, 11, and 13), but only if the debtor is under the jurisdiction of the court and the cancellation of the debt is granted by the court or occurs as a result of a plan approved by the court.

There may be other exceptions that apply to you but these are the two that apply to most people.

This IRS rule also applies in the rare event the amount you owe is reduced as part of a loan modification or if the lender simply cancels your loan as sometimes happens with second mortgage loans when the lender realizes the value of the homes has dropped significantly. You can read more about that here.

June 28, 2015 by Todd Murphy

How to Stop or Adjourn A Sheriff Sale in New Jersey

A Home Owner Is Entitled To Two Adjournments of A Sheriff Sale Simply By Requesting One and Paying A Small Fee to The Sheriff’s Office. Here’s How to Stop or Adjourn A Sheriff Sale.

Scroll down to get an easy-to-use form to stop your sheriff sale right now.

It takes a long time in New Jersey to foreclosure on a home in New Jersey but ultimately, if the loan can’t be worked-out and brought current through a loan modification or a bankruptcy, most foreclosure cases end at a Sheriff sale.

You may find you need to stop or adjourn a sheriff sale to get more time to work-out a foreclosure or sell your house.

You are entitled to two adjournments for any or no reason. But only two.

An adjournment is lawyer-speak for temporarily stopping and postponing a court action or hearing, in this case, a sheriff sale.

In a New Jersey foreclosure case once the plaintiff (your mortgage lender) has obtained final judgment, a sheriff sale may be scheduled.

The sheriff sale may be adjourned (postponed) by either the lender’s attorney or by you the homeowner.

Prior to 2019, the plaintiff was entitled to adjourn a Sheriff sale as may times as it wanted to for any or no reason but this rule was updated and now the attorney for the lender can only adjourn twice. You, the defendant (the home owner), have always been limited to two adjournments for any or no reason for two weeks each, however, also in 2019, the two weeks was updated to 30 days for each adjournment.

You have two 30-day adjournments available to. But once they have been used, they are gone forever.

This law was updated on April 29, 2019 and goes into effect on July 30 2019 changing the two week adjournments to 30-day adjournments – See the full article here on this and other foreclosure laws that have been amended in New Jersey.

In March 2020, Governor Murphy signed an executive order staying all evictions indefinitely.

Moratoriums Lifted November 2021.

In March 2020, Governor Murphy signed an executive order staying all evictions, and therefore sheriff sales, indefinitely for the COVID pandemic. As of November 2021, the moratorium has been lifted and sheriff sales are now again permitted.

As of January 2022, we have been overwhelmed with calls to adjourn or otherwise stop sheriff sales.

How Do I Get My Two Adjournments?

I have found over the years that all of the 21 County Sheriff offices across the State are staffed by extremely helpful individuals who make getting an adjournment easy.

Each County has its own procedures and sets its own costs to request an adjournment but generally speaking, there is a small fee – usually $28 – to request an adjournment and it must be done in person (so you can pay the fee).

You must have all of the information for the property and the sheriff sale listing and the docket number and Sheriff sale number and property address and the date of the sale and simply asking for the adjournment.

Some Sheriff offices have a simple form which you can fill-out and give to the Sheriff’s representative to request the adjournment.

We created an easy-to-use form for you.

So that you will have all of the necessary information with you when you arrive at the sheriff office, we created an easy-to-use form for you so you can get the sheriff sale adjourned quickly and easily.

Get your adjournment form here:

Submit your information here. The form will be emailed to you right away and can be used in every County in New Jersey.

Fill out my online form.

What Happens After I have Used My Two Adjournments?

Once you have taken your two adjournments, there are no more adjournments without asking a judge to intervene.

Motion to Stay A Sheriff Sale

If you have a very good reason, you may be able to ask a Judge by formally petitioning the Court and showing “good cause.”

For example, if you have a contract to sell your house and there will be enough money from the sale to pay-off the lender and some left over for you because you have equity in your house, that may be “good cause.”

If it becomes necessary to request and adjournment beyond the two 2-week adjournments, a formal request to the Court , known as a “motion” can be made but it must be for good cause.

This is something better done by a lawyer and typically can be a little costly. This additional adjournment is at the discretion of the judge and is only going to be granted for a very valid reason.

Homes Have Increased In Value Over the Last Year Creating Equity.

If your home can be sold for more than what you owe the lender, you may have equity in your property that you can’t afford to lose.

During this past year, home prices have soared in many towns in New Jersey creating equity that did not exist before.

Sell Your Home To Save Your Equity.

The recent increase in home values has provided an alternative to foreclosure that hasn’t existed in the past several years.

If your home can be sold at a price that can pay-off the loan and leave you with some money after closing, the option of perhaps selling your home may be a good option for you.

Get time to sell the house but only if you really have a legitimate contract.

There are many investors who are looking for properties to purchase and flip.

You may be approached by a real estate agent or investor on the eve of a sheriff sale offering to purchase your home. If so, you may need our help to review the contract quickly.

If you have a signed contract and can show a judge that your buyer has the funds to close and your lender will be paid in full and you will come out with some money too, the judge may adjourn the sherif sale to provide you and the buyer the time to get the house sold.

If you are approached by a buyer at the last minute, contact us right away to review the contract and petition the court for more time.

We can help you either save your house from foreclosure or to help you get more time to sell your house to save your equity.

June 27, 2015 by Todd Murphy

When Do I Have To Move After A Sheriff Sale in New Jersey?

If your home has been sold or is about to be sold, you must move – but read on.

You will have to move after a Sheriff Sale. When the time finally comes after you have tried everything you could try to save your home and your home is sold at a Sheriff Sale in New Jersey, the home is no longer yours and its time to think about moving. The ownership interest in the home is actually transferred by the Sheriff to the new buyer and you are required to move out of your home right away. But, there are still a couple of last minute strategies you might want to consider to stay in your home a little longer.

You Have 10 More Days.

There is a slight delay, though, after the sale. In New Jersey, there is something known as a 10-day right of redemption for the home owner. This gives the homeowner the right to pay-off the loan and prevent the home from being sold if it can be done within the 10 days after the sale. In some cases, a home owner might be able to borrow money from a friend or family member or get a hard-money loan. Therefore, the law provides for 10 days after the sale to do “redeem” your home. If not, as is usually the case, then, and only then, does the Sheriff transfer the property to the new owner.

For most people, then, that means you have an additional 10 days after the sale before you have to move.

What If You Can’t Move Right Away?

Even after the 10-day period, some people just can’t move after a Sheriff sale, at least not right away. Maybe you don’t have the money. Maybe you have nowhere to go. Maybe you or a family member is sick or disabled making it harder to move. There are many reasons. If that’s you, what should you do? Here are a couple of options:

Cash For Keys – Often the new owner will send a representative to your home to talk to about moving. An experienced foreclosure sale buyer knows that it may be hard for you to move and that it could be costly and time consuming to evict you. Therefore, a smart owner will offer you the necessary cash you need to move in exchange for you moving out right away or within a short period of time. Its common for a representative of the new owner to offer you $5000 if you move out in 30 days or $3000 if you move out in 60 days (see below to see why this is smart for them and how you can gain leverage to get money to move).

Make them Evict You – There is a 90-day period before eviction following a sheriff sale. Approximately 60 days after the sheriff sale, you will receive a final notice with a date set for eviction. If you can’t move before that date, you can go to the sheriff’s office and ask for a hearing where you can tell your story to the judge and ask for more time. You may get a couple of weeks or a couple of months. If you still can’t move on the extended eviction date, you can go before the judge again and ask for even more time. There are many extenuating circumstances that judges will consider in such cases: particularly for elderly home owners or for home owners with children. Now you know why its smart for the new owner to offer you cash for keys!

Having your home sold at a Sheriff sale is tough on even the strongest family but, as you can see from the information above, there are some last-minute things you an do to get more time before you move after a Sheriff sale. Even after the sale to stay in your home just a little longer.

June 26, 2015 by Todd Murphy

Who Will Bid On A Home In A Sheriff Sale In New Jersey

Often only your mortgage lender will bid on a home in a Sheriff Sale in New Jersey at a foreclosure Sheriff sale.

So, what does that mean to you?

First, the Sheriff Sale process in New Jersey for home owners in foreclosure is confusing and often scary. The fear of losing your home is staggering and those who are involved in it have many questions. There are many little strategies that, when put together, can prolong the time you stay in your home.

Here’s one little strategy that can help.

At a Sheriff Sale for a home being foreclosed on in New Jersey, often the mortgage lender is the only bidder at the Sheriff Sale, particularly if the home is underwater (value of the home is less than what is owed to the first mortgage lender). There usually isn’t anyone who would bid on a home at a price above market and the lender for some reason doesn’t yet want to face the fact that this loan is going to be closed-out at a loss.

The Bank Might Actually Be Happy That You Stay In The Home After The Sheriff Sale.

Why is this important? Because if the lender is the only bidder, rather than an investor or buyer who wants to live in the home, the lender may not be in a rush to get you out of the home after the sale. In fact, the lender might appreciate having someone living in the home and keeping it in reasonably good condition.

You Must Actually Be Evicted After A Sheriff Sale.

In another post, I will talk about eviction after a Sheriff Sale but for now just know that even after a Sheriff Sale, unless you leave the home freely, you must be evicted as if you were a tenant in the property and therefore are afforded certain protections under the law. For now, understand that is can be helpful to you if only the lender places a bid on a home in a Sheriff Sale In New Jersey.