Can I Keep My Home After Filing for Bankruptcy?

Bankruptcy by itself does not eliminate your mortgage obligations. Depending on the type of bankruptcy you file, it will eliminate some debts and place others in an affordable payment plan, giving you time to catch up on delinquent payments. In some states, your homestead (your primary residence) is exempt from creditors during a bankruptcy proceeding.

Considerations for All Bankruptcy Filings

Bankruptcy is often the last resort for those in dire financial straits. With your mind focused on discharging your debts and starting over, it can be difficult to worry about what happens afterward. It’s not a bad idea to take a few minutes and consider these facts about bankruptcies:

• When you file your bankruptcy, an automatic stay halts all collection proceedings, garnishments, and foreclosures. The stay does not halt your monthly mortgage payments. To keep your home, you must continue making mortgage payments.
• Bankruptcy provides debt relief for unsecured debt like credit cards and medical bills. It will not eliminate secured debt, such as mortgages and car loans.
• A Chapter 7 liquidation will dispose of all non-exempt property, including other real estate. Chapter 13 focuses on a payment plan that’s spread over three to five years.

A bankruptcy discharge will not reduce your mortgage balance, principal, or interest. Nor will it eliminate any past-due amounts. If you fall behind on your payments, it will not prevent a future foreclosure. However, a bankruptcy can free up your disposable income by removing unsecured debt that has drained your ability to make your mortgage payments.

Keeping Your Home With Chapter 7 (Liquidation)

In a Chapter 7 bankruptcy (liquidation), the bankruptcy trustee sells your non-exempt assets to pay creditors. Whether the trustee can liquidate your home depends on the equity you have relative to the allowable homestead exemption.

Each state has its own section of the bankruptcy code that determines what assets are exempt or non-exempt. Some states, like Florida and Texas, have unlimited homestead exemptions, meaning that you can claim the full amount of equity in your home in your bankruptcy. Other states have caps on how much equity you can set off against the amount you still owe.

You may be able to keep your home in a Chapter 7 if:

• You are still current on your mortgage payments, or can catch up quickly after the bankruptcy
• Your equity is below the homestead exemption
• Your goal in filing is to eliminate your unsecured debt and free up money to pay your mortgage

You can use the time during the automatic stay to avoid foreclosure to negotiate with your lender for repayment of your debt. Foreclosure can resume after the stay ends.

Chapter 7 will not protect your home if:

• You are too far behind on your mortgage payments, as Chapter 7 does not have a catch-up process unless you can personally negotiate with your lender
• Your equity substantially exceeds your state’s homestead exemption
• You are facing imminent foreclosure, and the automatic stay will not give you enough time to arrange a loan modification with your lender

As you can see, it’s an extremely complicated process. There’s no shame in meeting with a bankruptcy attorney if you feel like you’re getting in over your head.

Keeping Your Home With a Chapter 13 (Repayment Plan)

Under Chapter 13, bankruptcy filers must create a repayment plan. Homeowners have more flexibility to protect their personal property, since the goal is to repay secured and unsecured creditors over a three- to five-year period. Chapter 13 can be better for some homeowners. It has a much higher equity allowance and provides a mechanism for debtors to catch up missed payments.

You should consider a Chapter 13 to keep your home if:

• You are behind on your mortgage, possibly facing foreclosure, and need time to catch up
• Your equity is greater than the Chapter 7 exemption in your state
• Your income can cover your payment plan plus your arrears

If you have an unsecured second mortgage, a Chapter 13 provides a method of “stripping” that mortgage during your repayment plan.

When you file a Chapter 13, the automatic stay lasts the duration of your payment plan as long as you remain current with your payments. The lender can ask the court to lift the stay if you miss any payments, often without an adversary proceeding. If you cannot remain current, foreclosure proceedings may resume immediately.

As of July 2026, Chapter 13 bankruptcies have a debt limit that prevents debtors from filing if their secured debt exceeds $1,580,125 and their unsecured debt is more than $526,700. Legislation currently before Congress would raise the limit to a total debt of $2,750,000 secured and unsecured.

When You Should Walk Away

In some cases, it may be better to let the trustee take your home. Walking away from your house is a major consideration, but it’s an option you may need to consider when your bankruptcy numbers just aren’t adding up. Some signs that surrendering your home is the better option can include:

• You cannot afford your payment plan: If your mortgage remains unaffordable after you’ve completed a Chapter 13 and eliminated all other sources of debt, you may have to consider surrender. Your mortgage should not consume more than one-half of your take-home pay. If your payment is taking too much of your income, a fresh start is better without your debt dragging you down.
• The house is underwater: This means that you owe substantially more than the house is worth. You are not building any equity, and the house is costing you money. The bankruptcy process will not harm you more than leaving the home at this point.
• Unsustainable long-term expenses: Adjustable rate is increasing? Property taxes escalating? House needs maintenance you can’t afford? Mortgage payments beyond your means? It might be time to admit that the house is a money pit and costing you more than you can ever get back from it.

Despite the terminology of “walk away,” you can’t abandon your house. You must indicate your intention to surrender the home to the lender in your bankruptcy filing. If you’ve been making payments, stop doing so upon filing. The lender will foreclose on the house and then sell it. The “deficiency balance” (the difference between the amount of the mortgage and the sale price of the house) will be discharged in the bankruptcy.

For instance, if you owe $300K on the mortgage, and the lender sells the home for $250K, the remaining $50,000 deficiency is discharged. In a foreclosure outside of bankruptcy, the lender could sue you for that $50,000.

State-Specific Considerations

All states have different restrictions on allowable bankruptcy exemptions, as homestead exemptions and home equity limits vary by jurisdiction. State laws regarding community property and home equity can affect how you claim certain properties.

For example, California uses two exemption systems: “System 1” and “System 2”. The primary difference is the amount of home equity versus the “wildcard” exemption. Texas has an unlimited exemption for any property located on less than 10 acres in a city or on less than 100 acres in rural areas. States may have residency requirements of anywhere from six months to several years before you can file bankruptcy in the state.

Because of the specific state requirements for filing bankruptcy, homeowners should not try to file by themselves. If you want to keep your home, consider getting sound legal advice from someone in the area.

When To Get Legal Help

Even though a bankruptcy case is filed in federal bankruptcy court, the details are highly state-specific. Filers need help from bankruptcy lawyers who are familiar with bankruptcy law and the local court rules. You should consider legal assistance when:

• You are behind on your mortgage payments and are facing a definite foreclosure sale date
• You have multiple properties or have a co-ownership situation (a tenancy-in-common or joint-tenancy)
• You recently purchased or refinanced the property, or have a second mortgage lien
• Your equity is close to or exceeds the state homestead exemption
• You have a previous bankruptcy filing

A lawyer helps you navigate the bankruptcy process and understands many nuances of bankruptcy law. Paying an attorney’s fee when you’re already filing bankruptcy seems like another expense you can’t really afford. However, the attorney can help protect your home by assisting you in filing the bankruptcy petition, ensuring you meet the state and federal exemptions, and negotiating with lenders and the bankruptcy trustee on your behalf.

A bankruptcy attorney will know your state’s laws and represent you in court hearings. Having a bankruptcy attorney on your side is always a good idea in any bankruptcy case.

Get Bankruptcy Help From a Bankruptcy Lawyer Near You

If you’re caught in a financial tailspin, a lawyer familiar with the Bankruptcy Code can provide life-changing legal advice, even if you’re facing the prospect of losing your home. Contact a local bankruptcy attorney who is well-versed in your state’s bankruptcy laws. They can help answer questions about keeping your home safe in the face of bankruptcy, Chapter 13 plans, working with a bankruptcy trustee, and more.