If you file for bankruptcy, you probably will not lose your house. Most filers keep their homes. The outcome depends on three things working together: which chapter you file, how much equity you have in the property, and whether your state’s homestead exemption covers that equity. Chapter 13 is built to save homes, and Chapter 7 leaves the house alone as long as your equity fits inside the exemption. The real danger is filing without understanding how those pieces fit.
What Actually Puts a House at Risk
Two numbers decide everything. The first is your equity: the home’s current market value minus your mortgage balance and any other liens. If the house is worth $300,000 and you owe $220,000, your equity is $80,000. The second is your homestead exemption, the dollar amount your state (or federal law) lets you shield from creditors.
When your equity is fully covered by the exemption, no trustee has a reason to touch the house. When it isn’t, the exposed slice is what creates risk, and only in Chapter 7. Chapter 13 handles excess equity differently, through the repayment plan rather than a sale.
Chapter 7: When You Keep the House and When You Don’t
Chapter 7 puts a court-appointed trustee in charge of reviewing what you own. The trustee can sell anything that isn’t protected by an exemption and distribute the proceeds to your creditors.1United States Courts. Chapter 7 Bankruptcy Basics If your home equity is fully exempt, the trustee has nothing to gain by selling and will abandon interest in the property. You keep it.
The math turns uncomfortable when equity exceeds the exemption. Suppose your state exemption is $75,000 and you have $100,000 in equity. That leaves $25,000 exposed. A trustee will likely sell the house, pay off the mortgage lender, hand you a check for your $75,000 exemption, and distribute the remaining $25,000 to unsecured creditors. This is the scenario where Chapter 7 filers actually lose homes, and it is the one worth planning around before filing.
The Homestead Exemption Does the Real Work
Every state sets its own homestead exemption. A few, including Texas and Florida, offer unlimited protection, so the trustee can never reach your home equity no matter how large. Others cap the exemption in the tens of thousands. About a third of states let you choose between the state exemption and the federal one. The federal homestead exemption is $31,575 per filer as of April 2025, so a married couple filing jointly can protect up to $63,150.2Office of the Law Revision Counsel. 11 USC 522 – Exemptions In a state with a stingy exemption, the ability to elect federal exemptions can be the difference between keeping and losing your home.
The 1,215-Day Residency Rule
Federal law caps the state homestead exemption at $214,000 unless you have owned your home in that state for at least 1,215 days (roughly 40 months) before filing.2Office of the Law Revision Counsel. 11 USC 522 – Exemptions This matters most in states with unlimited exemptions, where a recent arrival might otherwise shield millions. If you sold a previous home in the same state and rolled the proceeds into your current one, the time at the old address counts toward the requirement. Anyone who recently moved across state lines or bought their first home should check this before filing.
Staying Current on the Mortgage Is Non-Negotiable
Bankruptcy can wipe out credit card debt and medical bills, but it does not eliminate the lien your mortgage lender holds on the house. Even if your equity is fully exempt and the trustee walks away, the lender can still foreclose after the case closes if you stop paying. Keeping the house means keeping the loan.
The Statement of Intention
Within 30 days of filing a Chapter 7 petition, or by the date of the creditors’ meeting if that comes first, you must file a Statement of Intention telling the court what you plan to do with each piece of property that secures a debt.3Office of the Law Revision Counsel. 11 USC 521 – Debtor’s Duties For your home, you have three choices: surrender it and walk away from the mortgage; reaffirm the debt by signing a new agreement that keeps you personally liable on the original loan terms; or redeem the property by paying the lender its current market value in a lump sum. Redemption is rare for homes because few filers can write that check. You then have 30 days after the first creditors’ meeting to follow through.4United States Courts. Official Form 108 – Statement of Intention for Individuals Filing Under Chapter 7
Reaffirm, or Just Keep Paying
Reaffirmation is the trickiest choice most Chapter 7 homeowners face. When you reaffirm a mortgage, you give up the bankruptcy protection on that specific debt. The loan continues as if you never filed, and the lender can sue you personally if you default later, including for a deficiency balance if the home eventually sells at foreclosure for less than you owe.5Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge The upside is that your on-time payments get reported to the credit bureaus, which helps you rebuild credit.
Many filers take a middle path called ride-through: keep making mortgage payments without signing a reaffirmation agreement. If you default later, the lender can take the house but cannot chase you for the balance. The cost is that those payments generally will not appear on your credit report, slowing your recovery. Whether ride-through works depends on your jurisdiction. Some courts accept it; others push for a formal reaffirmation or surrender. Local practice matters here, and it is one of the strongest reasons to work with a bankruptcy attorney who knows your district.
If you sign a reaffirmation agreement and change your mind, you can cancel. The deadline to rescind is 60 days after the agreement is filed with the court or the date your discharge is entered, whichever comes later.5Office of the Law Revision Counsel. 11 USC 524 – Effect of Discharge After that, you are locked in.
Chapter 13: The Stronger Tool for Homeowners
Chapter 13 is designed to save homes, and it is usually the right choice if you are already behind on mortgage payments or if your equity exceeds your exemption. Instead of a trustee liquidating assets, you propose a repayment plan lasting three to five years, make monthly payments to a trustee, and keep all your property.6United States Courts. Chapter 13 – Bankruptcy Basics
The moment you file, the automatic stay stops all collection activity, including a pending foreclosure sale.7Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The plan then lets you roll your missed mortgage payments into the three-to-five-year schedule while staying current on your regular monthly payments going forward.8Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan The court has to approve the plan, and the key test is whether your income realistically supports both the plan payment and the ongoing mortgage.
Plan length depends on your income compared to your state’s median. Below the median, the plan runs three years unless the court approves longer. At or above the median, it generally runs five. Nothing exceeds five years.6United States Courts. Chapter 13 – Bankruptcy Basics The Chapter 13 trustee also takes a percentage fee from each payment, commonly in the range of 7% to 10%, so factor that overhead in when you calculate what you can afford.
Stripping a Second Mortgage
Chapter 13 offers something Chapter 7 does not: lien stripping. If your home is worth less than the balance on your first mortgage, any junior liens (a second mortgage, a home equity line of credit) have no collateral supporting them. The court can reclassify those junior liens as unsecured, and you pay them through your plan at whatever percentage your disposable income allows. When the plan finishes, any remaining balance is discharged.9Office of the Law Revision Counsel. 11 USC 506 – Determination of Secured Status
For example, if your home is worth $250,000 and your first mortgage is $270,000, a $40,000 second mortgage has no equity behind it and can be stripped. The catch: the first mortgage balance must fully exceed the home’s market value. Even a dollar of equity above the first mortgage keeps the second lien secured and unstrippable.
When the Automatic Stay Will Not Save the House
The stay is powerful but not absolute. A mortgage lender can ask the court to lift it and let foreclosure proceed. Courts regularly grant these motions when the debtor has no equity in the property and the property is not necessary for an effective reorganization. In Chapter 7, the motion usually succeeds unless there is significant equity. In Chapter 13, the court is more likely to keep the stay in place as long as you are making plan payments.
Repeat filers get less protection. If a bankruptcy case was dismissed within the past year and you file again, the automatic stay expires after just 30 days unless you convince the court to extend it. If two or more cases were dismissed in the prior year, no automatic stay arises at all, and you have to petition the court to impose one.7Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The rule exists to stop repeat filings used only to stall foreclosure.
Before You File
You cannot simply pick the chapter that sounds better. Each has eligibility rules that may push you one way or the other.
Chapter 7 uses a means test. If your household income is below your state’s median, you pass. If it is above, a detailed calculation subtracts allowed expenses to see whether you have enough disposable income to fund a repayment plan. Failing the means test does not shut you out of bankruptcy; it just channels you into Chapter 13.
Chapter 13 has debt ceilings. As of 2026, secured debt cannot exceed $1,580,125 and unsecured debt cannot exceed $526,700.10Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor These are separate limits, so a large mortgage could push you over on secured debt even if your unsecured debts are modest.
Both chapters require a credit counseling briefing from an approved nonprofit within 180 days before your filing date.10Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor The session runs about an hour by phone or online. Skip it and your case gets dismissed.
The short version: run the equity math against your homestead exemption, check the 1,215-day rule if you have moved recently, and match your situation to the right chapter. Do that before filing, and the house almost always comes with you through the process.