Can I file Chapter 7 and keep my house?

Yes, Chapter 7 can wipe out most unsecured debt without you losing your home, but only if your home equity is fully protected. The key is your state's homestead exemption, which lets you shield a certain dollar amount of home equity from the bankruptcy trustee. If your equity (home value minus mortgage balance) fits within that exemption amount, the trustee cannot sell your home to pay creditors, and your unsecured debts like credit cards and medical bills get discharged.

The real risk comes when you have non-exempt equity. If your home is worth significantly more than you owe, the trustee can sell the house, give you the exemption amount in cash, and use the remaining proceeds to pay creditors before discharging your remaining debt. This is why checking your exemption coverage before filing is essential, as a miscalculation could mean losing the house to wipe out the debt.

If your home equity exceeds the amount your state's homestead exemption protects, Chapter 7 puts your house at risk because the trustee can sell it to pay creditors. In that situation, switching to Chapter 13 solves the problem by letting you keep the property as long as you stay current on a repayment plan.

In Chapter 7, unprotected equity is the trigger. The trustee looks at your home's market value, subtracts what you owe on the mortgage, subtracts your homestead exemption, and if a meaningful amount remains, a sale becomes likely. You would lose the house and get a check for your exemption amount, an outcome most homeowners want to avoid.

In Chapter 13, the math works differently. You still calculate your unprotected equity, but now that number sets a floor for what unsecured creditors must receive over the life of your three to five year plan. You pay that amount through the plan, not by selling your home. The trustee never liquidates the property. The tradeoff is clear: you must have reliable income to fund the plan and keep making mortgage payments on time. If you can do that, Chapter 13 converts a forced sale scenario into a structured payment obligation you control.

Your home equity determines whether the trustee can sell your property, so calculating it correctly is the single most important step before filing Chapter 7. If your equity is low enough to be fully covered by your state's homestead exemption, the trustee typically has no incentive to sell. If it's too high, you risk losing the house or needing to switch to Chapter 13.

Here's how to calculate your equity accurately:

1. Get a realistic current market value. Do not use your tax assessment or what you paid. Look at recent sales of comparable homes in your neighborhood. A real estate agent can run a comparative market analysis, or you can order a broker's price opinion for a more conservative, trustee-friendly figure.
2. Subtract your total secured debt. Add up your primary mortgage balance, any home equity loans, and any other liens recorded against the property. This total is what you owe to secured creditors.
3. Subtract the estimated cost of sale. Trustees do not get the full sale price. Deduct roughly 8% to 10% for realtor commissions, closing costs, and the trustee's own fee. This nets out how much money would actually remain from a hypothetical sale.

The result is your exposed equity, the amount the trustee could pay to your unsecured creditors. If this number is zero or close to it, your home is generally safe. If it's a substantial positive number, you'll need to compare it against your available homestead exemption in the next section. Use conservative estimates for value and costs, an overly optimistic calculation is where most homeowners get into trouble.

To see whether your homestead exemption covers you, you must compare your state's exemption limit to the amount of home equity you have right now. If your equity is less than the exemption, the Chapter 7 trustee typically cannot sell your home. If your equity exceeds the limit by a significant amount, the house may be at risk unless you can use other exemptions to cover the difference.

The homestead exemption is a state law that lets you protect a certain dollar amount of home equity from creditors in bankruptcy. Equity is your home's current market value minus what you still owe on the mortgage and any other loans against the property. Some states offer a generous exemption protecting hundreds of thousands of dollars, while others provide only a modest amount. The exemption applies only to your primary residence, not rental or vacation homes, and you usually must have lived in the state for a set period before filing to use that state's limits.

Consider a few examples. If your house is worth $300,000 and you owe $250,000, your equity is $50,000. In a state with a $60,000 homestead exemption, you are fully protected. But if your state only has a $25,000 exemption, you would have $25,000 of unprotected equity, which could prompt the trustee to sell. As another scenario, if you own a home free and clear worth $200,000 and your state exemption covers $175,000, that $25,000 gap still exposes the property to a potential sale, although the trustee must pay you your exemption amount from the proceeds. If your equity is well under the limit, the trustee usually abandons interest in the home, meaning you keep it as long as you stay current on the mortgage.

Even if your home equity is fully protected by a homestead exemption, the trustee can still sell your house in these specific situations:

• Your exemption is too small to cover all the equity. If you have $80,000 in equity but your state's homestead exemption only protects $50,000, the trustee can sell the home, give you your $50,000 in cash, and use the remaining $30,000 to pay creditors.
• You bought the home too recently. If you purchased the property within 1,215 days (about 3.3 years) before filing, your homestead exemption may be capped at a federal limit, potentially leaving exposed equity the trustee can pursue.
• The equity exceeds the exemption due to fraud or wrongdoing. If you transferred assets into the home or used non-exempt funds to pay down the mortgage shortly before filing, the trustee may object to the exemption and sell the property.
• The trustee can recover a lien or fraudulent transfer. If you paid off a creditor who holds a valid lien, or transferred the deed to someone else to shield the house, the trustee can undo those transactions and sell the home.
• The mortgage lender has already foreclosed or has a valid lien. The trustee won't sell a home with no equity, but if the lender forecloses, any remaining equity beyond what you can exempt still belongs to the bankruptcy estate.
• You fail to claim or properly document your homestead exemption. Missing paperwork, incorrect schedules, or failing to list the exemption can lead to a sale even when you would otherwise qualify for full protection.

The safest way to confirm your risk is to have a local bankruptcy attorney review your deed, mortgage balance, and exemption filing before you submit your paperwork.

Yes, you must keep making your regular mortgage payment after filing if you want to keep the house. Chapter 7 wipes out your personal liability for the loan, but it does not wipe out the lender's lien on the property. If you stop paying, the lender can still foreclose.

Staying current after filing is about protecting the collateral, not paying a debt you still legally owe. Here is what that means practically:

• The automatic stay pauses collection, not the bill. The lender cannot send you late notices or call you during the case, but the interest still accrues and the payment is still due each month.
• Get a reaffirmation agreement or just keep paying. In many districts, you can simply continue making on-time payments and stay in the home without formally reaffirming the debt. This is often called 'retain and pay.' If your lender or court requires a formal reaffirmation, your attorney will walk you through that separate filing.
• Do not rely on verbal assurances from the lender's customer service. Track your payments carefully and keep bank records showing each one cleared on time. If a payment accidentally gets returned during the brief window when your autopay is disconnected, fix it immediately.

Staying current keeps you in control. If you fall behind after filing, Chapter 7 provides no tool to catch up the missed payments, which is why the next section matters if you are already struggling.

Being behind on your mortgage when you file Chapter 7 creates immediate risk. The automatic stay temporarily stops a foreclosure that is already in progress, but the lender can quickly ask the court for permission to proceed, and the trustee will not make up missed payments for you.

You essentially have three paths, none of which involve Chapter 7 permanently fixing arrears on its own:

• You can negotiate directly with your lender for a reinstatement plan or loan modification during the brief pause the stay provides, though approval is not guaranteed.
• If your state allows and you act fast, you may be able to pay all missed amounts in a lump sum to reinstate the loan before the stay lifts.
• You can convert your case to Chapter 13, which is designed to let you catch up on missed mortgage payments over three to five years under court supervision.

Chapter 7 alone cannot cancel a valid mortgage lien or force a lender to forgive past-due payments. The moment your case closes or the court grants the lender relief from the stay, the foreclosure will pick up where it left off. If keeping the house matters, address the arrears issue before filing or be prepared to shift to Chapter 13.

Filing Chapter 7 when you co-own a home with someone who isn't filing (a spouse, partner, or family member) changes the risk calculation. The trustee can still sell your share of the property to pay creditors, even if the co-owner wants to keep the house, unless your equity is fully covered by a homestead exemption. This often creates a tense situation where the non-filing co-owner may need to buy out the bankruptcy estate's interest or face a forced sale.

The most common protection strategy is for the non-filing co-owner, or the household together, to prove that the cost of selling would leave no meaningful money for creditors after paying off the mortgage, the co-owner's separate interest, and closing costs. If the numbers show zero or minimal net benefit to the estate, a trustee will typically abandon the property. Since this depends heavily on local exemption laws and how your deed is titled (joint tenancy vs. tenancy in common), you should review your specific ownership structure with a local bankruptcy attorney before filing.

Chapter 7 does not protect a rental property or second home the way a homestead exemption can protect a primary residence. The trustee has the right to sell non-exempt assets, and investment properties almost always fall into that category because state homestead exemptions only apply to the home you actually live in.

Staying current on the mortgage for that second property changes nothing in a Chapter 7 case. Even if payments are on time and the loan is not in default, the court can still force a sale to hand the equity over to your unsecured creditors. The only way to reliably stop that sale is to pay the trustee the property's non-exempt equity or show that there is no meaningful equity after selling costs and your allowed exemptions are applied.

If keeping the rental or vacation home is a priority, Chapter 13 is the usual workaround. A Chapter 13 repayment plan lets you protect the property from liquidation by paying your disposable income to creditors over three to five years, which is a topic covered earlier in the discussion about switching chapters.