Will I Lose My Home if I File Bankruptcy?

For most bankruptcy filers, the answer is no — you will not lose your home. Whether you can keep your house depends on three factors: how much equity you have, your state's homestead exemption, and whether you're current on your mortgage payments.

How the Homestead Exemption Works

Every state allows bankruptcy filers to protect a certain amount of home equity through a "homestead exemption." If your equity is within the exemption limit, the bankruptcy trustee cannot sell your home to pay creditors.

Equity is the difference between your home's current market value and the amount you still owe on your mortgage. For example:

• Home value: $250,000
• Mortgage balance: $220,000
• Equity: $30,000

Example exemption amounts for Easy-Case pilot states:

• Illinois: Up to $15,000 in equity per person ($30,000 for joint filers)
• Indiana: Up to $19,300 in equity (adjusted for inflation)
• Wisconsin: Up to $75,000 in equity

If your equity falls below your state's exemption, the trustee has no financial incentive to sell your home. This is the case for the majority of homeowners who file Chapter 7.

What If Your Equity Exceeds the Exemption?

If your home equity exceeds the exemption limit, the Chapter 7 trustee could theoretically sell the home, pay off the mortgage, return your exemption amount, and distribute the remainder to creditors. In practice, this is uncommon — the trustee must also consider the costs of sale and whether the net proceeds justify the effort.

If you have significant non-exempt equity and want to keep your home, Chapter 13 may be a better option. You keep all your property in Chapter 13 as long as your repayment plan pays unsecured creditors at least what they'd receive in a Chapter 7 liquidation.

What About Your Mortgage Payments?

The homestead exemption only protects equity — it doesn't affect your mortgage obligation. If you want to keep your home after bankruptcy, you must continue making mortgage payments.

• In Chapter 7: You'll typically need to "reaffirm" your mortgage — sign a new agreement acknowledging you'll remain personally liable for the loan in exchange for keeping the home.
• In Chapter 13: Your mortgage payments are often incorporated into your repayment plan. If you're behind on payments, Chapter 13 lets you catch up on mortgage arrears over the 3–5 year plan period — stopping foreclosure while you repay what you owe.

Using Chapter 13 to Stop Foreclosure

One of the most powerful uses of Chapter 13 is stopping a foreclosure mid-process. When you file, the automatic stay immediately halts the foreclosure proceeding. Your Chapter 13 plan then allows you to cure the arrears (the missed payments) over time while resuming regular payments going forward.

Many homeowners who are 3–12 months behind on their mortgage choose Chapter 13 specifically for this reason.

Your Next Step

Easy-Case's screener will ask about your home equity, state, and mortgage status to help you understand the likely outcome for your specific situation. Learn about exempt vs. non-exempt property or understand the automatic stay's protections.