What Happens to My House if I File Chapter 7 Bankruptcy?

Your House During Chapter 7 Bankruptcy

Many debtors are under the impression that they will automatically lose their home if they file Chapter 7 bankruptcy . The idea has even kept many from filing to begin with but in most cases, you’ll be able to keep personal property including your home. The ability to keep your home often depends on several factors including exemptions and any equity your home may have.

Nonexempt property that’s part of your bankruptcy estate may be used to satisfy creditors by the trustee, but this often doesn’t apply in many cases. This is due to exemptions you may qualify for upon filing that helps protect personal property as part of the estate. When it comes to your home, there are several factors that are reviewed to help determine if it can be exempt.

Unsecured creditors may be entitled to personal property of value to settle outstanding debt. If your house has no equity (the mortgage amount is higher than the value of the home), chances are it can’t be sold by the trustee. On the other hand, if there is equity in the home, it could be saved through the homestead exemption. There are exemptions at the state and federal levels your home may qualify for as long as the home is your principal residence. The amount varies by state so it’s important to review the amounts allowed by your state upon filing your petition.

There is also a wildcard exemption that may help cover additional equity not covered under the homestead exemption.  Continuing to make mortgage payments during and after the filing process can also help you keep your home.