Will Chapter 7 Bankruptcy Take My House? Here’s What You Need to Know

For many people facing overwhelming debt, the fear of losing their home is the biggest reason they hesitate to file for bankruptcy. If you’re considering Chapter 7 bankruptcy, you might be asking yourself: “Will Chapter 7 bankruptcy take my house?” The answer depends on several key factors, including your mortgage status, how much equity you have, and the legal exemptions available to you.

At Kamini Fox, PLLC, we help individuals throughout New York understand their options and protect what matters most—including their homes. Below, we explain how Chapter 7 bankruptcy affects homeownership and when your house might be at risk.

What Is Chapter 7 Bankruptcy?

Chapter 7 bankruptcy, often called “liquidation bankruptcy,” is designed to eliminate unsecured debts like credit cards and medical bills. In exchange, the bankruptcy trustee may sell (or “liquidate”) non-exempt assets to repay creditors.

But don’t panic—many people who file for Chapter 7 bankruptcy keep their homes, especially when they understand how exemptions and mortgage rules apply.

Can Chapter 7 Bankruptcy Take My House?

The court doesn’t automatically take your house just because you filed for bankruptcy. Whether you keep your home depends on these three factors:

1. Are You Current on Mortgage Payments?

• If you’re up to date on your payments and your equity is protected by exemptions (more on that below), you’re likely to keep your home.

• If you’re behind on payments, the lender can eventually move forward with foreclosure, even during bankruptcy, especially if you can’t catch up.

2. How Much Equity Do You Have in the Home?

Equity is the value of your home minus what you owe on it. If your equity is below the New York homestead exemption limit, your home is protected and won’t be sold.

• In New York, the homestead exemption ranges from $89,975 to $204,825, depending on the county you live in.

If your equity exceeds the exemption amount, the bankruptcy trustee may sell your home to pay off creditors, but you would receive the exempt portion of the proceeds.

3. Can You Afford Future Payments?

Even if you keep your house during bankruptcy, you must continue paying your mortgage. Chapter 7 doesn’t eliminate your mortgage debt—it only wipes out your personal obligation to pay it. If you stop making payments, the lender can foreclose, regardless of your bankruptcy filing.

When You Might Lose Your House in Chapter 7 Bankruptcy

• Your equity exceeds the exemption limit.

• You are significantly behind on mortgage payments and cannot catch up.

• You don’t want to keep the home and prefer to walk away from the debt.

• You fail to reaffirm the mortgage (a separate legal agreement to continue paying after bankruptcy).

How to Protect Your Home in Bankruptcy

If you want to keep your house and are eligible for Chapter 7, here are a few tips:

• Stay current on payments before and after filing.

• Make sure your equity is within the exemption limits.

• Consider filing a reaffirmation agreement with your mortgage lender.

• Consult with a qualified bankruptcy attorney to determine the best strategy.

  
  

When Chapter 13 May Be a Better Option

If you’re behind on mortgage payments but want to keep your home, Chapter 13 bankruptcy might be a better fit. Chapter 13 allows you to create a 3–5 year repayment plan to catch up on missed payments while stopping foreclosure.

Need Guidance? Kamini Fox, PLLC Can Help

At Kamini Fox, PLLC, we understand how stressful the idea of losing your home can be. That’s why we take the time to review your financial situation, explain your options, and help you file the type of bankruptcy that protects your long-term interests.

Will Chapter 7 bankruptcy take your house? Maybe not. But it’s crucial to get the facts before you file.

Contact us today to schedule a confidential consultation and find out whether Chapter 7 is the right path for you—and your home.