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If You File Bankruptcy Can You Keep Your House? What to Know
If You File Bankruptcy Can You Keep Your House in 2025? If you file bankruptcy can you keep your house
September 22, 2025
If You File Bankruptcy Can You Keep Your House? What to Know
If You File Bankruptcy Can You Keep Your House in 2025?
If you file bankruptcy can you keep your house in 2025? It’s one of the most pressing questions for homeowners facing overwhelming debt. The short answer is: it depends. Bankruptcy may offer a way to eliminate or restructure debt, but whether you can keep your home depends on the type of bankruptcy you file, your home equity, and your ability to stay current on mortgage payments.
In this article, we’ll break down how your home is treated in bankruptcy, what exemptions apply, and what strategies can help you protect your property while resolving debt.
Understanding Bankruptcy and Property Exemptions
Filing for bankruptcy does not automatically mean giving up your home. In many cases, people can keep their homes, especially if they qualify for exemptions that protect their equity. But understanding how exemptions work is critical to making the right decision.
What Is the Bankruptcy Estate?
When you file bankruptcy, all your property—including your house—becomes part of what’s called the bankruptcy estate. This is the pool of assets available to repay creditors. However, not everything in the estate is up for grabs. Bankruptcy law allows for exemptions—legal protections that shield certain property, like your primary residence, from being sold.
These exemptions vary by state and bankruptcy chapter, and how much equity you have in your home plays a major role.
Homestead Exemptions: State vs. Federal Rules
The homestead exemption is a legal provision that protects a portion of the equity in your home from creditors. Some states require you to use their exemption laws, while others allow you to choose between state and federal exemption limits.
- As of 2025, the federal homestead exemption is approximately $27,900 for individuals and $55,800 for married couples filing jointly (adjusted periodically for inflation).
- Some states offer higher exemption limits—for example, Florida and Texas allow unlimited homestead exemptions under certain conditions.
- Other states may have lower caps, such as $15,000–$25,000, making it harder to protect homes with significant equity.
If your home equity is within the allowed exemption, you may be able to keep your house regardless of whether you file Chapter 7 or Chapter 13.
For a breakdown of exemptions in your area, explore your state’s bankruptcy rules.
What Equity Is Protected in Chapter 7 or 13?
Equity refers to the difference between your home’s market value and what you owe on your mortgage. If your equity is less than the exemption limit, your house is protected.
For example:
- Home value: $250,000
- Mortgage owed: $240,000
- Equity: $10,000
- Federal exemption: $27,900
Result: You can keep your house
But if your equity exceeds the exemption (e.g., $40,000 in equity in a state with a $25,000 limit), a Chapter 7 trustee may try to sell your home to repay creditors. In contrast, Chapter 13 allows you to keep your house even with higher equity, as long as you pay the equivalent value through your repayment plan.
How Chapter 7 Bankruptcy Affects Your Home
Chapter 7 is known as “liquidation bankruptcy,” but that doesn’t always mean losing your home. Whether you can stay in your house depends on your equity, mortgage status, and ability to remain current on payments.
Will the Trustee Sell My House in Chapter 7?
In a Chapter 7 case, a bankruptcy trustee reviews your assets and determines if any non-exempt property can be sold to repay creditors. If your home equity exceeds the exemption, the trustee could move to sell your home. However, if your equity is protected and you’re current on your mortgage, the trustee typically has no reason to liquidate your house.
Even when there’s modest non-exempt equity, some trustees may allow you to buy back the interest in your home over time instead of forcing a sale.
What Happens If You’re Behind on Mortgage Payments?
If you’re behind on your mortgage at the time of filing Chapter 7, things become riskier. Chapter 7 does not allow you to catch up on missed payments through a repayment plan. While the automatic stay temporarily halts foreclosure, it may only buy you time, not protect your home long-term.
Lenders can request relief from the stay and resume foreclosure if you can’t bring the loan current quickly.
In this situation, many homeowners choose Chapter 13 instead (more on that in the next section).
Can You Reaffirm the Mortgage to Keep Your Home?
If you’re current on payments and want to stay in your house, you can reaffirm the mortgage debt in Chapter 7. A reaffirmation agreement is a legally binding promise to continue paying your loan after bankruptcy.
By reaffirming the debt:
- You keep the property and mortgage
- The loan is not discharged in your bankruptcy
- You remain personally liable for the debt after bankruptcy
Reaffirmation must be approved by the court and should only be done if you’re confident you can continue making payments.
How Chapter 13 Bankruptcy Helps You Keep Your House
If you’re behind on your mortgage or have equity that exceeds your state’s exemption limits, Chapter 13 bankruptcy may be the safer path to protect your home. This type of bankruptcy is designed to help individuals reorganize debt while keeping important assets, including their house.
How Repayment Plans Protect Your Home
Chapter 13 allows you to create a court-approved repayment plan that lasts three to five years. Through this plan, you can catch up on missed mortgage payments gradually, without the threat of foreclosure.
Unlike Chapter 7, Chapter 13 does not involve liquidating assets to repay creditors. As long as you maintain your payments under the plan and continue paying your mortgage, you can stay in your house.
This is especially beneficial for homeowners who:
- Have fallen behind on mortgage payments
- Have non-exempt equity in their home
- Are facing imminent foreclosure
Catching Up on Missed Payments Over Time
If you’re, for example, $10,000 behind on mortgage payments, Chapter 13 lets you spread those missed payments over the life of your repayment plan. You’ll resume regular mortgage payments while chipping away at the arrears each month.
This structured approach is a powerful tool for avoiding foreclosure while maintaining ownership of your property.
Preventing Foreclosure With Chapter 13
Filing Chapter 13 triggers an automatic stay, which immediately halts foreclosure proceedings. This protection remains in place throughout your case, as long as:
- You follow the repayment plan
- You stay current on new mortgage payments
- You meet other obligations outlined in the plan
If you’re at risk of losing your home to foreclosure, Chapter 13 may be your best shot at keeping it, especially if you have a steady income and the ability to catch up over time.
To explore whether Chapter 13 suits your case, review the full process of how to file Chapter 13 bankruptcy.
Key Factors That Decide If You Can Keep Your Home
Whether or not you can keep your house after filing for bankruptcy isn’t always a straightforward answer. Several key factors influence the outcome:
Mortgage Status and Arrears
One of the most critical considerations is whether you’re current or behind on your mortgage:
- Current on payments: You’re more likely to keep your home in either Chapter 7 or Chapter 13.
- Behind on payments: Chapter 13 offers more flexibility to catch up and avoid foreclosure.
In Chapter 7, falling behind may lead to foreclosure unless you can bring the loan current quickly or negotiate with your lender.
Your State’s Homestead Exemption Limit
Each state sets a homestead exemption—the amount of home equity you can protect. If your equity exceeds this limit:
- You risk losing your home in Chapter 7
- You may still keep it in Chapter 13 by repaying non-exempt equity over time
Understanding your local exemption rules is critical. For guidance, review the state-specific bankruptcy exemptions.
The Chapter You Choose to File Under
The type of bankruptcy you file significantly impacts your ability to retain your home:
- Chapter 7 is quicker and less expensive but riskier if you have unprotected equity or mortgage arrears.
- Chapter 13 is more complex but often a better fit for homeowners with equity or past-due payments.
Choosing the right chapter is one of the most important decisions in the bankruptcy process—and one that can determine the future of your homeownership.
Consulting a bankruptcy attorney can help you weigh the pros and cons of each option and determine what’s most beneficial in your unique case.
Risks to Your Home During Bankruptcy
Even if your intent is to keep your home, certain risks could still put it in jeopardy. Being aware of these potential pitfalls can help you avoid unnecessary complications.
Losing Your Home If Equity Exceeds Exemption Limits
In Chapter 7, if your home equity is above the exemption limit, the trustee may sell your home—even if you’re current on the mortgage. The trustee would use the proceeds to pay off creditors, giving you only the exempted amount as a return.
In Chapter 13, while you may keep your home with excess equity, you’ll be required to pay the non-exempt portion over the course of the repayment plan.
What Happens If Your Payment Plan Fails?
In Chapter 13, you must stick to your repayment plan. If you miss payments, the court may dismiss your case or convert it to Chapter 7, potentially putting your home at risk if equity is unprotected.
Additionally, if you fall behind on new mortgage payments after filing, your lender can ask the court to lift the automatic stay and resume foreclosure.
Homeowners’ Insurance and Bankruptcy Complications
Another overlooked risk is failing to maintain homeowners’ insurance during bankruptcy. If your coverage lapses, your mortgage lender may force insurance upon you, or begin foreclosure due to breach of contract.
Always keep your insurance policy active and updated throughout the bankruptcy process to avoid issues with your lender or the court.
Can You Keep Your House If You File Bankruptcy? Here’s the Bottom Line
If you file bankruptcy can you keep your house? In many cases, yes. Whether you retain your home depends on the chapter you file, your mortgage status, your state’s homestead exemption, and how much equity you have. Chapter 7 may allow you to keep your home if you’re current on payments and your equity is protected. Chapter 13 gives homeowners behind on payments the opportunity to catch up and prevent foreclosure. With the right legal strategy, bankruptcy can be a powerful tool to both relieve debt and keep your home secure.
Learn If You Can Keep Your House When Filing Bankruptcy
Still wondering if you file bankruptcy can you keep your house? The best way to get clear answers is to speak with a professional. A qualified bankruptcy attorney can assess your equity, review your mortgage status, and help you determine the best chapter to file.
Start with a free evaluation or contact us today to protect your home and find out how bankruptcy may offer the relief you need.
Frequently Asked Questions (FAQs)
1. Can I keep my house in Chapter 7 if I’m current on payments?
Yes, if your home equity is fully covered by your state’s exemption and you’re current on mortgage payments, you can typically keep your house in Chapter 7.
2. What happens to my home if I have a second mortgage?
A second mortgage doesn’t go away in bankruptcy unless it’s completely unsecured (e.g., your home value is less than your first mortgage balance). In Chapter 13, you may be able to remove (“strip”) a second mortgage if conditions apply.
3. Will bankruptcy stop a foreclosure sale?
Yes. Filing for bankruptcy triggers an automatic stay, which stops foreclosure proceedings temporarily. In Chapter 13, it may give you enough time to catch up on missed payments and avoid foreclosure entirely.
4. Do I lose my house if I miss Chapter 13 payments?
If you miss payments under a Chapter 13 plan, your case could be dismissed, which may allow your lender to restart foreclosure. However, courts sometimes allow modifications or extensions if you act quickly.
5. Can I sell my house after filing for bankruptcy?
Yes, but with restrictions. In Chapter 13, you typically need court approval to sell your home. In Chapter 7, selling might only be possible if the trustee abandons interest in the property or your case is closed.
Key Takeaways
- Bankruptcy can allow you to keep your house, depending on your equity and mortgage status.
- Chapter 7 may protect your home if your equity is within exemption limits and you’re current on payments.
- Chapter 13 lets you catch up on missed mortgage payments and protect your home from foreclosure.
- Your state’s homestead exemption is critical in determining how much equity you can protect.
- Consulting a bankruptcy attorney ensures you make informed decisions that help you stay in your home.
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