ABA Family Legal Guide

Consumer Bankruptcy

Saving Your Home

I am going to proceed under Chapter 7-what will happen to my house?

There is a chance you may lose it. Even if you're willing to continue making the required monthly payments, you could still lose your home if you file for bankruptcy under Chapter 7.

With a Chapter 7 filing, if you have no equity in your home and you haven't made your payments, the creditor can foreclose on your home (take it from you) during or after bankruptcy, even if your unsecured debts are discharged. The Chapter 7 discharge does not release the lien. Of course, a lender can also foreclose on your home in these circumstances if you do not file for bankruptcy.

If you do have equity in your home, your unsecured creditors may also have an interest in your home, especially if it is worth more than the total of your mortgage debt and any applicable homestead exemption. In that case, the bankruptcy trustee may take possession of your home and sell it for the benefit of your unsecured creditors—in other words, it may become part of the assets collected for distribution by the trustee.