You Want to File for Bankruptcy But Keep Your Home. What Should You Do?

One of the most common questions bankruptcy professionals receive from individuals who have just filed for bankruptcy (or are thinking about filing) is: “Will I lose my home?”

As much as we wish that we could provide a succinct answer, the truth is that your chances of keeping your home if you file for bankruptcy depends on several factors. It is generally true that filing for Chapter 13 bankruptcy is better for filers who want to keep their homes; however, that does not mean that you will automatically be put out on the streets if you file for Chapter 7. This blog will explore some considerations associated with your home and bankruptcy. 

Your Home and Chapter 13 Bankruptcy

In a nutshell, a Chapter 13 bankruptcy involves the filer working with his or her attorney, trustee and creditors to come up with a repayment plan that pays back at least some of the debts. The length of the repayment plan is 3-5 years. A good repayment plan allows the filer to catch up on missed mortgage payments (if applicable) and meet future mortgage payments (and other essential payments). So, unless the filer simply wants to sell his or her house in a Chapter 13 filing, he or she is likely to keep the house. 

Your Home and Chapter 7 Bankruptcy

Unfortunately, there is a chance you will be forced to surrender your house in a Chapter 7 bankruptcy filing. The main difference between a Chapter 7 and Chapter 13 filing is that the bankruptcy trustee is free to seize and sell your nonexempt property to satisfy your debts to creditors. There is a homestead exemption in Illinois of $15,000, which means that bankruptcy creditors are not allowed to take your house if you have that amount of equity or less in your house.  

Unfortunately, this exemption cap means that if you have a significant amount of equity in your house, creditors may take your house and sell it to satisfy your debts. However, if your priority is keeping your home, and you do not have a significant amount of equity in your house, then filing for Chapter 7 bankruptcy might eliminate enough of your unsecured debts so that you are able to get back on track with your mortgage payments. 

An important note: filing for bankruptcy does not absolve you from your mortgage payments (past, current, or future). You will get a brief reprieve from foreclosure and other collection actions immediately after filing for bankruptcy through the automatic stay [link to August 2020 blog], but this relief is only temporary. 


If you are even considering filing for bankruptcy, the thought of losing your home probably looms large in the back of your mind. The bottom line is that if you are not too far behind on your mortgage payments and do not have a significant amount of equity in your home, you’re in a relatively good position. 

There are, however, plenty of factors that need to be considered before you file for bankruptcy. The best way to meet your goals in a bankruptcy filing is to discuss your situation with a quality firm like Velazquez Consumer Law, LLC. A free consultation is the first step in reclaiming your financial future. Call us at 630-576-9030 to get started.

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Velazquez Consumer Law

Central to our firm is the empathetic and compassionate service we give each client that allows us to fully understand your situation and goals. Above all, our responsive and hands-on approach to your legal issues yields actual results.

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