“Will I lose my house if I declare bankruptcy”, this is perhaps the most common question people have when they first begin to consider declaring bankruptcy. The answer to this question is going to depend on the kind of bankruptcy you file for, in combination with other sorts of factors that may have an effect on your ability to keep your home.

When you want to declare personal bankruptcy, you will either be looking to file for chapter 7, or chapter 13. A chapter 7 filing can allow for an immediate discharge of the majority of your unsecured debts, but will only happen after you have listed all of your property and assets for the court to go over and evaluate. The end goal of this is to determine if any of your assets can be sold off to pay back your creditors, and while most people that file for chapter 7 don’t have any significant assets to begin with, it is still a smart move to know where you stand with the items that you are still making payments on, such as a car, or a house. Certain kinds of property are considered to be exempt from sale, and this is normally established on a state level in a more explicit fashion.

Your home is considered to be an exempt form of property by most states, and the equity that is present in your home should be exempt up to a certain amount. This is more commonly referred to as the homestead exemption, and the exact amount that will be able to be exempt is regulated on a state level, and can be as high as the entire amount of equity that is present within your home. Some states have no homestead exemption, and it is therefore in your best interest to look up what you state specifies in regard to this metric.

That being said, you can plan on having a certain portion, if not all of the equity in your home exempt from sale during a chapter 7 filing, and it is very rare for there ever to be an outright sale of a home as a result of a chapter 7 filing. This does not mean that a chapter 7 filing will prevent the foreclosure process, as your mortgage loan is a secured form of debt that is not treated in the same way as the unsecured debts that may be eligible for a discharge by way of a chapter 7 filing. This means that you can still lose your house as a result of a foreclosure process if you filed for chapter 7, but the likelihood of losing it as a result of the actual bankruptcy proceedings is minimal, and most people who file chapter 7 get to keep their homes without much effect from the actual bankruptcy.

Chapter 13 works a bit differently because with a chapter 13 filing a repayment plan is established instead of an immediate discharge, and therefore your creditors will receive some money as a result of this plan. This means that you don’t have to worry about your assets being sold off with a chapter 13 filing, and the equity in your home should be safe as a direct consequence of this. A chapter 13 filing can also stop the foreclosure process due to the fact that the terms of your mortgage will most likely be reorganized during the writing of your repayment plan. You will then have to make payments according to the terms of your repayment plan to keep your house, as these will most often be different than the original terms you may have had with your original note. Remember that you should be able to keep your home whether you file for chapter 7, or chapter 13, as long as you can handle the foreclosure process that may take place when you file for chapter 7, and you abide by the terms of your repayment plan if you filed for chapter 13.