Will I Lose My Home in Chapter 7 Bankruptcy?

: Chris Lee Law Firm

  Filed under: Chapter 7

chapter 7While Chapter 7 bankruptcy is a highly sought after form of debt relief, many clients worry about losing their home as a result of filing Chapter 7 bankruptcy. Therefore, it’s important to know what happens to a home you own when you file Chapter 7 bankruptcy.

 Keeping Your Home

Keeping your home in Chapter 7 bankruptcy depends on a few factors, with the amount of homestead exemption and the amount of equity you have in the home being the most paramount. When you file for Chapter 7 bankruptcy, your home and other property are placed into a bankruptcy estate which is controlled by a bankruptcy trustee. The trustee will work to liquidate/sell all nonexempt assets that are a part of that estate. Homestead exemptions differ from state to state and on the federal level as well, so working with a Dallas bankruptcy attorney will help you get the most exemptions legally possible.

The point of selling your nonexempt assets is to build up cash that is then used to pay your creditors. Therefore, if you have no equity in your home, you won’t lose your home in a Chapter 7 bankruptcy due to the fact that selling it wouldn’t raise any money. If you do have equity in the home, then you can use the homestead exemptions to exempt the amount of equity. If you have more equity in your home than your homestead exemption covers, you may be able to use a wildcard exemption, should your state have one, to cover the remainder of the equity.

It’s important to note, that in a Chapter 7 bankruptcy discharge your mortgage liability will be eliminated, however the mortgage company still owns a lien on your home so it’s important to continue making your mortgage payments in order to prevent foreclosure. While filing for bankruptcy gives you an automatic stay against creditors that will put a hold on any foreclosure sale of your house, this doesn’t last forever and if you fail to make your payments after discharge, the mortgage company can reinitiate the normal foreclosure proceedings. If you are behind on your home payments and don’t want to lose your home, contact your local bankruptcy attorney to discuss how you can keep your home if possible and also eliminate other debt that is holding you back.


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