If you’re drowning in debt, the fear of losing your home can feel like the final straw.
One of the most common questions people ask before speaking with a bankruptcy attorney is:
“If I file bankruptcy, will I lose my house?”
The honest answer is: not necessarily — and in many cases, you can file bankruptcy and keep your home.
Let’s break down how that works, what affects the outcome, and what you should know before making any big financial decisions.
The Short Answer: Bankruptcy Doesn’t Automatically Mean You Lose Your House
A lot of people avoid bankruptcy because they believe it’s the same thing as “giving everything up.”
But bankruptcy is actually a legal tool designed to help you:
- stop creditor harassment
- eliminate or restructure debt
- catch up on missed payments
- protect certain property (including a home)
Whether you can keep your house depends on three key factors:
- What type of bankruptcy you file (Chapter 7 vs. Chapter 13)
- How much equity you have in your home
- Whether you’re behind on your mortgage
First: What Bankruptcy Chapter Are You Filing?
Chapter 7 Bankruptcy (Fresh Start Bankruptcy)
Chapter 7 is designed to wipe out unsecured debt like:
- credit cards
- medical bills
- personal loans
- old utility bills
- collections and judgments (in many cases)
If you’re current on your mortgage and your home equity is protected under exemptions, you may be able to keep your home in Chapter 7.
But if you’re behind on payments, Chapter 7 usually does not give you a long-term way to catch up.
Chapter 13 Bankruptcy (Payment Plan Bankruptcy)
Chapter 13 is often the best option for homeowners who are:
- behind on mortgage payments
- facing foreclosure
- trying to keep a home with more equity
In Chapter 13, you make a court-approved payment plan (usually 3–5 years). The benefit is huge:
✅ It can stop foreclosure immediately
✅ It can allow you to catch up on missed mortgage payments over time
This is why Chapter 13 is often called the “save your house” bankruptcy.
The Big Issue: Home Equity (And Why It Matters)
In bankruptcy, equity is the value of the home minus what you owe.
Example:
- Home value: $300,000
- Mortgage balance: $240,000
- Equity: $60,000
Whether that equity is protected depends on your state and which exemptions apply.
What are bankruptcy exemptions?
Exemptions are laws that protect certain property from creditors during bankruptcy.
If your equity is covered by exemptions, you may keep the home even in Chapter 7.
If your equity is too high:
- Chapter 7 could put the home at risk
- Chapter 13 may still allow you to keep it (but requires a plan)
What If You’re Behind on Your Mortgage?
This is where the difference between Chapter 7 and Chapter 13 becomes critical.
If you’re behind and file Chapter 7:
- Bankruptcy can temporarily delay foreclosure
- But it usually doesn’t give you a mechanism to catch up
- The lender can often resume foreclosure after the bankruptcy ends
If you’re behind and file Chapter 13:
- You can catch up on missed payments over time
- Foreclosure is stopped while you’re in the plan
- You resume regular mortgage payments plus a monthly “catch-up” amount
This is one of the biggest reasons people file Chapter 13 bankruptcy.
The Interesting Question: Should You Stop Paying Your Mortgage Before Filing Bankruptcy?
This is a question people Google all the time, and the answer surprises them.
No — in most cases, you should NOT stop paying your mortgage before bankruptcy.
Here’s why:
- If you’re current, it’s easier to keep the home
- Falling behind may force you into Chapter 13
- Missed payments add late fees, attorney fees, and foreclosure costs
- You lose options
Unless an attorney specifically advises otherwise, stopping mortgage payments “to save money” often creates bigger problems.
What About Foreclosure? Can Bankruptcy Stop It?
Yes — bankruptcy can stop foreclosure through something called the automatic stay.
The automatic stay is a federal court order that immediately stops most collection actions, including:
- foreclosure sales
- wage garnishments
- bank levies
- lawsuits
- collection calls
But timing matters.
If your foreclosure sale is scheduled soon, you need legal help fast because certain last-minute filings can become complicated.
Can Bankruptcy Eliminate a Second Mortgage or HELOC?
Sometimes, yes — and this is another question people don’t expect.
In certain Chapter 13 cases, if your home value is less than the balance of the first mortgage, you may be able to “strip” a second mortgage or HELOC.
That can mean:
- turning the second mortgage into unsecured debt
- paying pennies on the dollar through the plan
- potentially eliminating it
Not everyone qualifies, but it can be a powerful strategy.
Common Myths About Bankruptcy and Homeownership
Let’s clear up a few:
❌ Myth: Bankruptcy means you lose everything
Truth: Most people keep their home, car, and basic property.
❌ Myth: You can’t buy a home again
Truth: Many people qualify for a mortgage again sooner than expected.
❌ Myth: Filing bankruptcy ruins your life
Truth: For many, bankruptcy is the first step toward rebuilding financial stability.
When Bankruptcy Might NOT Be the Best Option
Bankruptcy is powerful, but it isn’t always the best tool.
You may want to explore alternatives if:
- your income is stable and debts are manageable
- you’re only dealing with one creditor
- you may qualify for loan modification or repayment assistance
- the debt is mostly student loans (usually not dischargeable)
A consultation with an experienced bankruptcy attorney can help you compare options.
Final Thoughts: Yes, You Can Often File Bankruptcy and Keep Your House
If you’re overwhelmed by debt and worried about your home, don’t assume bankruptcy means losing it.
In many cases, bankruptcy can actually be the tool that helps you:
- protect your house
- stop foreclosure
- eliminate debt
- rebuild financially
Contact Us For A Consultation
If you’re considering bankruptcy and want to know whether you can keep your house, the best next step is a confidential consultation.
We can review your mortgage status, equity, income, and debt — and explain your options clearly.
📞 Call our office today at 855-978-6564.
