You can usually keep your house when you file bankruptcy, but the answer depends on three things working in your favor: the chapter you file under, how much equity you have in the home, and whether you can keep up with the mortgage. Chapter 13 is the stronger tool if you are behind on payments, because it lets you spread the arrears across a three-to-five-year repayment plan. Chapter 7 can work if you are current on the mortgage and your equity fits within the homestead exemption your state or federal law allows.
Which Chapter Fits Your Situation
Chapter 7 is a liquidation. A court-appointed trustee reviews your assets, sells anything not protected by an exemption, and pays creditors from the proceeds.1United States Courts. Chapter 7 – Bankruptcy Basics If your home equity is fully covered by an exemption, the trustee has no reason to touch the house. What Chapter 7 will not do is help you catch up on missed mortgage payments. You either stay current or the lender resumes foreclosure once the case closes.
Chapter 13 is a repayment plan lasting three to five years.2United States Courts. Chapter 13 Bankruptcy Basics Overdue mortgage payments get folded into the plan and paid over its life, while you resume making regular monthly payments to the lender. This is the mechanism that actually stops a foreclosure in progress on a home you want to keep.
Not everyone qualifies for either chapter. Chapter 7 requires passing a means test that compares your household income to the median in your state. Below median, you qualify. Above median, you may still qualify after allowed deductions, or you may be pushed into Chapter 13 instead.3Office of the Law Revision Counsel. 11 USC 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13 Chapter 13 requires regular income sufficient to fund a plan.
How the Homestead Exemption Decides Chapter 7
The homestead exemption shields a specific dollar amount of equity in your primary residence from the trustee. If your equity is fully covered, the trustee will not sell the home, because after paying off the mortgage and honoring the exemption there would be nothing left for creditors.
The federal homestead exemption protects up to $31,575 of equity in your primary residence for cases filed between April 1, 2025, and March 31, 2028. Married couples filing jointly can double that to $63,150.4Office of the Law Revision Counsel. 11 US Code 522 – Exemptions A federal wildcard exemption adds up to $1,675 in any property, plus up to $15,800 of any unused homestead exemption you can redirect to other assets.
Not every state lets you use those federal amounts. Federal law allows states to opt out and require residents to use only the state’s own exemptions, and a majority have done so.4Office of the Law Revision Counsel. 11 US Code 522 – Exemptions Some state homestead exemptions are far more generous than the federal amount; others are lower; a handful are unlimited. Where you have a choice, an attorney will compare both systems and pick whichever protects more of your property.
Do the math before you file. Estimate your home’s fair market value, subtract what you owe on the mortgage, and compare the remaining equity to whatever exemption applies to you. If the exemption covers it, Chapter 7 will not cost you the house. If it does not, the trustee can sell the home to reach the unprotected portion, and Chapter 13 becomes the safer option.
How Chapter 13 Saves a Home From Foreclosure
Chapter 13 is built for homeowners in trouble. Its central advantage is that your repayment plan can include every overdue mortgage payment, spread across three to five years. You keep making the regular monthly payment to the lender on time, and the plan pays down the arrearage in the background.2United States Courts. Chapter 13 Bankruptcy Basics Complete the plan, and you are current on the mortgage as if you had never fallen behind.
The catch is post-petition payments. The plan handles the past; you are responsible for every mortgage payment that comes due after you file. This is where most failing Chapter 13 cases actually fail. Depending on the jurisdiction, you may pay the lender directly or route payments through the Chapter 13 trustee under a conduit plan. Either way, on time and in full.
Stripping a Second Mortgage
If your home is worth less than what you owe on the first mortgage alone, Chapter 13 lets you strip junior liens such as a second mortgage or a HELOC. The court reclassifies the junior lien as unsecured debt, and it gets paid alongside credit cards in your plan, often at pennies on the dollar. When the plan completes, the lien comes off the property.4Office of the Law Revision Counsel. 11 US Code 522 – Exemptions
The first mortgage balance must fully exceed the home’s current value. If the home is worth $200,000 and the first mortgage is $210,000, the second lien is wholly unsecured and can be stripped. If the home is worth $200,000 and the first mortgage is $195,000, the $5,000 of equity partially secures the second lien and stripping is not available.
What Filing Does to a Pending Foreclosure
The moment you file under any chapter, an automatic stay takes effect and stops most collection activity, including a scheduled foreclosure sale.5Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay If the sale is next week, filing halts it.
The stay is temporary. In Chapter 7 it lasts only while the case is open, generally three to four months, after which the lender can resume foreclosure if you are still behind. In Chapter 13 the protection effectively runs the length of the plan, as long as you make your payments.
Repeat filers get less. If a prior case was dismissed within the past year, the automatic stay in your new case expires after 30 days unless the court extends it on a good-faith showing. If two or more prior cases were dismissed within the past year, no stay takes effect at all when you file, and you would have to petition the court to impose one.5Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay
What Can Still Cost You the House
A Chapter 13 Plan That Fails
If you fall behind on plan payments, miss post-petition mortgage payments, or fail other plan requirements, the court can dismiss the case or convert it to Chapter 7.6Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal Dismissal is brutal for homeowners: the stay evaporates, creditors can restart foreclosure, and progress on curing arrears through the plan may be lost. Courts can sometimes modify a confirmed plan to lower payments temporarily, so talk to your attorney before you miss a payment rather than after.
Reaffirming the Mortgage in Chapter 7
A reaffirmation agreement makes you personally liable for the mortgage again despite the discharge. You can rescind it within 60 days after filing. For consumer debt secured by real estate, court approval of the reaffirmation is not required, which means less judicial protection on what is probably your largest debt.7Office of the Law Revision Counsel. 11 US Code 524 – Effect of Discharge If you reaffirm and later default, the lender can foreclose and sue you for any deficiency, just as if you had never filed. Many homeowners instead keep paying without reaffirming; some courts allow this ride-through, and the lender has no reason to foreclose while payments arrive.
If keeping the home no longer makes financial sense, you can surrender it. Chapter 7 discharges your personal obligation, so you walk away without owing a deficiency, though the lender’s lien on the property survives.1United States Courts. Chapter 7 – Bankruptcy Basics
Moving the House Before Filing
Do not transfer your home to a relative, sell it below market value, or make large payments to favored creditors before filing. The trustee can reverse any transfer made within two years before filing if it was for less than fair value or done with intent to defraud creditors.8Office of the Law Revision Counsel. 11 USC 548 – Fraudulent Transfers and Obligations State fraudulent transfer laws often reach back four years or more. Payments to insiders like family members can be clawed back if made within one year, versus 90 days for ordinary creditors. Beyond the financial reversal, a fraudulent transfer can result in denial of your discharge entirely, which leaves you with the debts and without the protection you filed for.