You can file for bankruptcy and keep your house in most cases. Whether filing bankruptcy and keeping your house actually works out comes down to three things: how much equity you have in the property, whether that equity is covered by the homestead exemption available to you, and whether you can keep paying the mortgage going forward. Chapter 7 works if you are current on payments and your equity fits within the exemption. Chapter 13 is the tool if you are behind or your equity is too large to protect outright.
Filing Stops Foreclosure the Same Day
The moment your petition is filed, the automatic stay takes effect and halts almost all collection activity against you, including an active foreclosure.1Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay A sale scheduled for tomorrow does not happen. A notice of default already recorded does not move forward. This is true whether you file Chapter 7 or Chapter 13.
The stay is a pause, not a cure. In Chapter 7, a lender who is not being paid can ask the court to lift the stay, and if you have no way to get current, the court will usually grant that request. In Chapter 13, the stay tends to hold, because the repayment plan gives the court a reason to keep it in place: the arrears are being cured on a schedule the lender can see.
How Much Equity Bankruptcy Protects
Equity is the number that decides everything else. Take the home’s market value, subtract the mortgage balance and every other lien on the property (second mortgages, HELOCs, tax liens, judgment liens), and what remains is your equity.2Nolo. Should I File for Chapter 7 or Chapter 13 If I Want to Keep My Home? That is the amount the bankruptcy system treats as an asset that could, in theory, be used to pay creditors.
The homestead exemption is what keeps that asset out of reach. It shields a set dollar amount of home equity from the trustee and from unsecured creditors. If your equity fits inside the exemption, no one can force a sale of the house.
Federal Exemption or State Exemption
Which exemption you use is not always your choice. About half the states have opted out of the federal system, meaning residents there must use the state’s homestead exemption. The other states, including New York, Texas, Pennsylvania, and Massachusetts, let filers pick whichever set (federal or state) protects more.3Office of the Law Revision Counsel. 11 USC 522 – Exemptions
The federal homestead exemption for cases filed in 2026 is $31,575 for an individual filer and $63,150 for a married couple filing jointly.3Office of the Law Revision Counsel. 11 USC 522 – Exemptions State amounts range from a few thousand dollars to unlimited protection, so the state figure is often what matters most. Look up your state’s exemption before doing anything else.
Residency and Recent-Purchase Limits
Two rules stop people from moving or buying into a generous exemption right before filing. To claim a state’s homestead exemption, you must have lived in that state for at least 730 days (two years) before filing. Move within that window and you may be forced to use your prior state’s exemption, or fall back to the federal one.3Office of the Law Revision Counsel. 11 USC 522 – Exemptions
Separately, if you acquired the home within 1,215 days (about three years and four months) before filing, your state homestead exemption is capped at $214,000 no matter how generous the state normally is.4Office of the Law Revision Counsel. 11 U.S. Code 522 – Exemptions
Keeping the House Under Chapter 7
Chapter 7 is a liquidation. A trustee reviews your assets, sells anything not covered by an exemption, and distributes what comes in to creditors.5United States Courts. Chapter 7 – Bankruptcy Basics To keep your house through Chapter 7, two things must be true at the same time.
You have to be current on the mortgage. Chapter 7 gives you no way to catch up on missed payments. The automatic stay will pause a foreclosure, but if you cannot resume payments and cover what you missed, the lender will get the stay lifted and the foreclosure will continue.
Your equity has to fit inside the homestead exemption. If your exempt amount fully covers your equity, the trustee has no reason to sell: after paying you your exempt cash and covering the costs of sale, nothing would be left for creditors. If equity exceeds the exemption, the trustee can sell the home, pay you the exempt portion in cash, and give the rest to creditors.5United States Courts. Chapter 7 – Bankruptcy Basics
Reaffirmation and Ride-Through
After filing, your lender may ask you to sign a reaffirmation agreement. This is a court-filed contract in which you agree to remain personally liable on the mortgage even after your other debts are discharged. In return, the lender keeps the loan in place and typically reports your payments to the credit bureaus.6City Bar Justice Center. Bankruptcy: Understanding Reaffirmation Agreements
The risk is real. If you fall behind after reaffirming, the lender can foreclose and pursue you for any deficiency, because you gave up the discharge protection on that debt. In many districts, a home mortgage can instead “ride through” the bankruptcy without a reaffirmation: you keep paying, the lender keeps accepting, and the loan continues. Some lenders will not report on-time payments in a ride-through, which slows credit recovery. Availability depends on your district’s case law, so ask an attorney before signing anything.6City Bar Justice Center. Bankruptcy: Understanding Reaffirmation Agreements
Keeping the House Under Chapter 13
Chapter 13 is the chapter built for homeowners in trouble. You propose a repayment plan lasting three to five years, and the plan solves the two problems Chapter 7 cannot fix: past-due mortgage payments and equity that exceeds the exemption.7United States Courts. Chapter 13 – Bankruptcy Basics
Curing the Arrears
Missed mortgage payments get spread across the life of the plan. You resume your regular monthly mortgage payment directly to the lender, and the total arrears are folded into the plan payment you send to the Chapter 13 trustee. Complete the plan and the lender must treat the mortgage as fully current.7United States Courts. Chapter 13 – Bankruptcy Basics
If you cannot keep up with plan payments, the court can dismiss the case or convert it to Chapter 7. The stay lifts, and any pending foreclosure resumes. A realistic budget before proposing the plan is what separates plans that work from plans that collapse.
Paying for Excess Equity
When your equity exceeds the exemption, Chapter 7 would mean losing the house. Chapter 13 lets you keep it, but requires your unsecured creditors to receive at least as much through the plan as they would have received from a Chapter 7 sale. If you have $50,000 in equity and can only exempt $30,000, the $20,000 gap gets paid to unsecured creditors through your monthly plan payments.
Stripping a Second Mortgage
Chapter 13 offers a tool Chapter 7 does not. If your first mortgage balance exceeds the home’s current market value, any second mortgage or HELOC is unsecured in economic reality because no equity supports it. The court can reclassify that junior lien as unsecured debt, treated like credit card balances or medical bills in the plan. Whatever portion is unpaid at the end of the plan is discharged, and the lien comes off the property.
The threshold is strict. If the home is worth $200,000 and the first mortgage balance is $250,000, a second lien can be stripped in full. If the home is worth $275,000 against the same first mortgage, there is $25,000 of equity backing the second lien, and it cannot be stripped. Federal law also prohibits reducing the principal balance on a first mortgage secured by your primary residence, so lien stripping is only for underwater junior liens.
What Filing Costs and Requires
The court filing fee is $78 for both Chapter 7 and Chapter 13. Attorney fees vary by location and case complexity; Chapter 7 representation generally costs less than Chapter 13, and Chapter 13 attorney fees are often paid through the plan itself rather than upfront.
Two courses are required. A credit counseling course from an approved provider must be completed before you file, and the certificate has to reach the court within 14 days of the petition or the case can be dismissed. A second course in personal financial management is required after filing, before your discharge is entered. Both are typically available online for modest fees.
Buying a Home After a Bankruptcy Discharge
If keeping the current house does not work out, or you are thinking further ahead, a discharge is not a permanent bar to a mortgage. FHA loans require a two-year wait after a Chapter 7 discharge, dropping to 12 months if the bankruptcy came from a documented one-time event such as a medical crisis or the death of a spouse. Borrowers currently in a Chapter 13 plan can qualify after at least one year of on-time plan payments.8FHA.com. FHA Loan Approval with a Bankruptcy in Your Past Conventional loans backed by Fannie Mae require four years after a Chapter 7 discharge, reducible to two with documented extenuating circumstances, and two years from a Chapter 13 discharge or four years from a Chapter 13 dismissal. Multiple filings within seven years extend the wait to five years.9Fannie Mae. Significant Derogatory Credit Events – Waiting Periods and Re-establishing Credit
Rebuilding credit during the waiting period changes what rates you qualify for. Secured cards, on-time rent reported to the bureaus, and low utilization all help.