Can I keep my house if I file bankruptcy?
In most cases, yes. Your home is protected if the equity is within your state's homestead exemption. In Chapter 13, you can keep your house even if you are behind on payments by curing the arrears over 3-5 years. In Chapter 7, you keep the house if it is fully exempt and you stay current on the mortgage.
What is the homestead exemption?
The homestead exemption protects equity in your primary residence from creditors and the bankruptcy trustee. Amounts vary dramatically by state -- Texas, Florida, and Kansas have unlimited homestead exemptions, while some states protect only $5,000-$10,000. The federal homestead exemption is $27,900.
Does filing bankruptcy stop foreclosure?
Yes, immediately. The automatic stay under Section 362 halts all foreclosure proceedings the moment you file. In Chapter 13, you can then catch up on mortgage arrears over 3-5 years while maintaining current payments. In Chapter 7, the stay only provides temporary relief.
How does Chapter 13 help me save my house?
Chapter 13 allows you to cure mortgage arrears over 3-5 years through your repayment plan while making current mortgage payments. The lender cannot foreclose as long as you make plan payments and stay current. This is the most powerful tool for saving a home from foreclosure.
What if I have too much equity in my home?
If your home equity exceeds the homestead exemption, the Chapter 7 trustee could sell the home. In this case, Chapter 13 may be better because you keep your property but must pay unsecured creditors at least the value of your non-exempt equity through the plan.
Can I keep my house in Chapter 7?
Yes, if your equity is within the homestead exemption and you continue making mortgage payments. The trustee will not sell a fully exempt home. However, Chapter 7 does not provide a mechanism to catch up on missed mortgage payments.
What is a lien strip in bankruptcy?
Lien stripping removes a wholly unsecured junior lien (like a second mortgage) from your property in Chapter 13. If your first mortgage balance exceeds the home's value, the second mortgage is treated as unsecured debt and can be discharged. This only works in Chapter 13, not Chapter 7.
Can the mortgage lender take my house after discharge?
The discharge eliminates your personal liability on the mortgage debt, but the lien survives. If you stop making payments after discharge, the lender can still foreclose on the property. To keep the house, you must continue making mortgage payments.
What happens to my second mortgage in bankruptcy?
In Chapter 13, if your home is worth less than the first mortgage balance, the second mortgage can be stripped (treated as unsecured). In Chapter 7, all mortgage liens survive. You must continue paying both mortgages to keep the house.
How much time does the automatic stay give me?
In Chapter 7, the stay typically lasts 3-4 months (until discharge or the lender gets relief). In Chapter 13, the stay can protect your home for the entire 3-5 year plan period. However, you must make plan payments and stay current on the mortgage.
Can I refinance my house during bankruptcy?
In Chapter 13, you need court approval to take on new debt, including a refinance. Courts may approve refinancing if it benefits the estate (e.g., lower payments). In Chapter 7, wait until after discharge. Refinancing after bankruptcy is possible but may require waiting 1-4 years.
What if I'm behind on property taxes?
Property tax arrears can be cured through a Chapter 13 plan. Property taxes are a priority debt that must be paid in full through the plan. Failure to pay property taxes can also lead to tax lien foreclosure, which the automatic stay temporarily stops.
Does bankruptcy affect my rental property?
Investment and rental properties are not protected by the homestead exemption. In Chapter 7, the trustee may sell rental property with non-exempt equity. In Chapter 13, you can keep rental property but must pay the non-exempt equity value to unsecured creditors.
Can I buy a house after bankruptcy?
Yes. FHA loans are available 2 years after Chapter 7 discharge or 1 year into a Chapter 13 plan (with court approval). Conventional loans typically require a 4-year wait after Chapter 7. VA loans require 2 years. Rebuilding credit immediately after discharge speeds up the timeline.
What if I want to surrender my house in bankruptcy?
You can surrender your home in either chapter. In Chapter 7, the mortgage deficiency is discharged. In Chapter 13, you include the surrender in your plan. After surrender, you are no longer liable for the mortgage, but you must vacate according to state law timelines.