1. Homestead Exemption Verification
The homestead exemption is the single most important factor in keeping your home. If your equity is within the exemption, the trustee cannot sell your home.
- Look up your state's homestead exemption amountAmounts range from $5,000 to unlimited depending on the state. Check your state's exemption statute.
- Determine if you can use federal exemptions insteadSome states let you choose between state and federal exemptions. The federal homestead exemption is $27,900 per person ($55,800 for a married couple filing jointly) in 2026.
- Confirm the property is your primary residenceHomestead exemptions only apply to your primary residence, not investment properties or vacation homes.
- Check the 1,215-day residency rule (11 U.S.C. section 522(b)(3)(A))If you moved states within the last 1,215 days (about 3.3 years), you may be limited to your previous state's exemption or the federal cap of $189,050.
- Verify whether your state's exemption applies per person or per householdIf married filing jointly and your state allows doubling, both spouses can claim the exemption on the same property.
- Write down your exemption amount: $________
2. Mortgage Current Status
- Get your most recent mortgage statementYou need the current balance, interest rate, monthly payment amount, and escrow balance.
- Request a payoff statement from your lenderThe payoff amount differs from the balance -- it includes per-diem interest through the payoff date.
- Determine if you are current or behind on paymentsIf behind, calculate the total arrears (missed payments + late fees + lender attorney fees).
- Check for any second mortgage or HELOC balance
- Check for any property tax delinquencyProperty taxes are priority claims in bankruptcy and must be paid in full.
- Review your loan modification history (if applicable)
- Check if a foreclosure action has been filedIf yes, bankruptcy filing stops the foreclosure through the automatic stay. Time is critical.
- Write down total mortgage debt: $________
- Write down monthly payment amount: $________
- Write down arrears (if any): $________
3. Equity Calculation
Calculate your equity to determine whether the homestead exemption covers it.
- Determine fair market value of your homeOptions: recent appraisal, comparative market analysis (CMA) from a real estate agent (often free), Zillow/Redfin estimate, or county tax assessment (usually below market value).
- Subtract first mortgage balance
- Subtract second mortgage/HELOC balance (if any)
- Subtract estimated cost of sale (6-8%)Most courts allow deducting hypothetical sale costs because a trustee would incur them to sell the property.
- The result is your equity
- First mortgage balance: $________
- Second mortgage/HELOC: $________
- Cost of sale (7%): $________
= Your equity: $________
Your homestead exemption: $________
If equity < exemption: Home is protected
If equity > exemption: Home may be at risk in Chapter 7
4. Reaffirmation Decision
In Chapter 7, you must decide what to do with your mortgage. This is one of the most important decisions in your case.
Option A: Continue paying without reaffirming ("ride-through")
Recommended in most cases. You keep making payments and keep the house. The mortgage is discharged as a personal liability, but the lien remains. If you later stop paying, the lender can foreclose but cannot sue you for a deficiency. This gives you maximum flexibility.
- Confirm your district allows ride-through (most do)
- Continue making regular monthly payments on time
- Understand: you may lose access to online mortgage portals after discharge
Option B: Reaffirm the mortgage
Usually NOT recommended. Reaffirmation makes you personally liable again for the full mortgage. If you later default and the home is foreclosed, the lender can pursue you for the deficiency. The only benefits are maintaining credit reporting and full access to online account management.
- File a reaffirmation agreement (Form 240A) before discharge
- The court must approve it (judge may hold a hearing)
- Understand: you are giving up the discharge protection for this debt
Option C: Surrender the property
- Indicate surrender on Statement of Intention (Form 108)
- Stop making payments
- Cooperate with the lender or trustee on transfer
- The mortgage debt is discharged -- no deficiency liability
5. Chapter 13 Plan Requirements (If Filing Chapter 13)
Chapter 13 is the primary tool for saving a home from foreclosure. The plan lets you cure arrears over 3-5 years while maintaining current payments.
- Calculate total mortgage arrears to cure through the planThis includes all missed payments, late fees, and lender attorney fees that accrued before filing.
- Confirm you can afford current mortgage payments going forwardChapter 13 requires you to stay current on the mortgage from the filing date forward.
- Calculate monthly plan payment = arrears cure + trustee fee + other plan obligationsThe trustee takes a percentage (varies by district, typically 3-10%) on top of the arrears cure amount.
- Determine plan length: 3 years (below median income) or 5 years (above median)
- Verify the plan is feasible with your budget (Schedule I minus Schedule J)
- If underwater: consider lien stripping for junior mortgagesIf the first mortgage exceeds the home's value, a second mortgage can potentially be stripped (reclassified as unsecured) in Chapter 13. 11 U.S.C. section 506(a).
- File the Chapter 13 plan within 14 days of the petition
11 U.S.C. section 1322(b)(5): The Chapter 13 plan may provide for curing any default on a long-term debt (like a mortgage) and maintaining payments while the case is pending.
6. Documents to Gather
- Most recent mortgage statement (all mortgages on the property)
- Property tax bill (most recent)
- Homeowners insurance declarations page
- HOA statements (if applicable)
- Property appraisal, CMA, or online value estimate
- Deed or title documentation
- Foreclosure notices (if any received)
- Loan modification agreements or denial letters
- Your state's homestead exemption statute (printed or bookmarked)