Can you keep your house if you file for bankruptcy?

Two questions decide it

Whether you keep your home depends on two things: equity — how much the home is worth above what you owe on it — and payments — whether you are current on the mortgage or behind.

The homestead exemption

Every state lets bankruptcy filers protect some home equity. The amounts vary enormously:

• Unlimited in value (with acreage limits) in Florida, Texas, Iowa, Kansas, Oklahoma and a few other states.
• Large in states such as California (between roughly $300,000 and $700,000 depending on the county's median home price), Massachusetts ($500,000 with a declared homestead) and Arizona ($400,000).
• Modest in some states, such as a few tens of thousands of dollars.
• The federal exemption, available in states that allow a choice, is $31,575 per person as of April 2025, and married couples filing together can double it.

To use a state's exemption, you generally must have lived there for two years before filing (730 days); otherwise the previous state's rules may apply. A federal cap, about $214,000, limits homestead exemptions for homes bought within roughly 3.3 years (1,215 days) before filing, regardless of state law.

Keeping the house in Chapter 7

If the equity is fully covered by the exemption and you keep making mortgage payments, the trustee has no reason to sell and you keep the home. If the equity exceeds the exemption, the trustee may sell it, pay off the mortgage and your exempt amount to you, and use the rest for creditors — or let you buy out the non-exempt equity. Chapter 7 also cannot cure missed payments: if you are behind, the automatic stay only delays foreclosure, and the lender can ask the court to lift the stay.

Keeping the house in Chapter 13

Chapter 13 is the main tool for saving a home. It lets you:

• Stop a foreclosure, even shortly before a sale, through the automatic stay.
• Cure arrears over three to five years while making regular monthly payments.
• Protect non-exempt equity by paying unsecured creditors at least its value through the plan instead of selling the home.
• Strip off a wholly unsecured second mortgage or home equity loan when the home is worth less than the first mortgage.

The plan payment must be affordable on top of the regular mortgage payment; if you fall behind again, the lender can seek permission to foreclose.

Worked example

A home is worth $400,000 with a $300,000 mortgage, so equity is $100,000. In a state with a $150,000 homestead exemption, all the equity is protected and a current homeowner can keep the house in Chapter 7. In a state with a $50,000 exemption, $50,000 of equity is exposed; in Chapter 7 the trustee might sell, while in Chapter 13 the owner can keep the house by paying unsecured creditors at least $50,000 (less sale costs the trustee would have incurred) over the plan.

Joint ownership and spouses

If only one spouse files, the non-filing spouse's share is not part of the estate, though the trustee can sometimes sell jointly owned property. In states with tenancy by the entirety, a home owned by a married couple may be fully protected when only one spouse files and the debts are individual.

The mortgage still has to be paid

Bankruptcy discharges personal liability, but the mortgage lien stays on the house. To keep the home, you must keep paying. Some lenders stop sending statements after a Chapter 7 discharge if the loan was not reaffirmed; keep paying anyway.

Alternatives to consider

Loan modification, forbearance, a repayment plan with the servicer, or a short sale may solve the problem without bankruptcy. Filing is often most useful when foreclosure is imminent or other debts are overwhelming.

Next steps

Get an estimate of your home's value and a mortgage payoff statement, and bring your mortgage statements and any foreclosure notices to a bankruptcy attorney. Timing matters: filing before the foreclosure sale can save the home, filing after usually cannot.