Skip to content


Can You File for Bankruptcy and Keep Your House?

7 min read
Philip Ahn, Attorney

by Philip Ahn, Attorney

Filing for bankruptcy can protect your home and hold off foreclosure. But the circumstances of your bankruptcy filing need to be right. You should be sure that you meet all the requirements for the type of bankruptcy Chapter you file under.

Keeping a home is a big worry among those filing for bankruptcy. Our homes are not just assets we keep for their financial value. They provide us with emotional comfort and become part of our identity. Understandably, even if you find yourself in a difficult financial situation, you probably will be looking for ways to keep the title to your home.

Fortunately, filing for bankruptcy can help protect your home from foreclosure. But you must file for bankruptcy under the right Chapter and meet all the requirements.

When Do People File for Bankruptcy?

In most cases, people file for bankruptcy when they find themselves in complicated financial situations and become unable to pay off debts. There can be many reasons why this happens: substantial medical bills, overextended credit, unemployment, business problems, divorce — and more. 

The purpose of filing for bankruptcy is to help eliminate all or part of the debts you’ve accumulated and emerge with a fresh start. 

What Determines Whether You Can Keep Your Home After Bankruptcy?

Three key factors determine whether you will be able to keep your home after bankruptcy:

  • The type of bankruptcy Chapter you file under
  • The amount of home equity already paid on your mortgage
  • Whether you can afford monthly mortgage payments to manage your debt

What Bankruptcy Chapter Should You File Under To Keep Your House?

There are five types of bankruptcy procedures. However, when it comes to individual filings, the most common bankruptcy filing chapters are Chapter 7 and Chapter 13. 

Chapter 7 bankruptcy is known as a “straight bankruptcy.” Under Chapter 7, you will need to liquidate most of your assets and pay off as much debt as you can. To qualify, you need to prove that your income is so low that you are unable to pay off your debts without a formal bankruptcy filing. 

Under Chapter 13 bankruptcy, your debt is restructured. This means that a court-appointed trustee will review your obligations to creditors and then design a repayment plan. You will need to complete this repayment plan within a specific amount of time — typically from three to five years. When you complete the repayment plan, all your remaining debts will be discharged. 

When considering which Chapter to file under, one of the main factors to consider is the exemptions available based on your financial circumstances.

The laws of the federal government require that everyone must pay off their debts and then if anyone possesses “excessive property,” that should be sold to pay off their obligations.

With that said the purpose of a bankruptcy filing is not to leave you penniless. On the contrary, it is supposed to help you get back on track. This is why there are exemptions — those assets you are allowed to keep when filing for bankruptcy. 

Overall, the number of exemptions you are entitled to when filing under Chapter 7 is lower compared to exemptions under Chapter 13.  But Chapter 13 generally offers more flexibility for debt repayment. In short, you are more likely to keep your home if you file Chapter 13 than if you file under Chapter 7.

How Much Equity Do You Have In Your House? 

Even if you file under Chapter 7, there can be ways for you to keep your home. The main consideration will be the equity you have built up in your house.

Equity is the current market value of a house minus the balance remaining on your mortgage. If you have little or negative equity in your house, it will most likely be exempt from liquidation in the bankruptcy process. 

On the other hand, if the equity in your home is over the Chapter 7 exemption limit, you may be instructed to liquidate your house and use the proceeds to pay off your debts. 

Can You Afford Monthly Mortgage Payments?

If you can keep your house after the bankruptcy process, you will need to continue making your monthly mortgage payments.

As you will now be free of your debt, you may find you have the resources to afford mortgage payments. But if your income is not sufficient to pay your mortgage obligations, the bank may foreclose on your home. 

This is why it is important to decide whether you want to keep your home and its requirement to keep making mortgage payments after bankruptcy. One of the main benefits of filing for bankruptcy is that you can start with a clean slate and walk away from all financial obligations that put you in a complicated financial situation in the first place. If you have doubts about whether you will be able to make monthly mortgage payments, it may be best to give up your home. This can give you time to put your financial affairs in order without the burden of large monthly financial obligations. 

Do I Need an Attorney to File for Bankruptcy?

If you are filing for personal bankruptcy, you are not required to have legal representation. But having a lawyer to guide you through the bankruptcy filing process is often a useful option. 

The decision to file for bankruptcy often has to be made at a complicated time in your life. You may feel stressed, overwhelmed, and worried about the future. In short, you may simply not have the resources to figure out how to handle a complicated legal process by yourself.  A lawyer can take the legal work off your hands and help you with the following activities:

  • Deciding which bankruptcy Chapter to file
  • Completing and filing your petition with the bankruptcy court including all necessary paperwork 
  • Negotiating for help on mortgages, car loans, and other debt
  • Talking to creditors on your behalf — and more.

A lawyer can help evaluate your chances to keep your home through the bankruptcy process and offer necessary guidance on the right steps to take.

If you do decide to represent yourself in a bankruptcy process, make sure to conduct proper research as you may have to deal with strict paperwork filing deadlines. If such an option exists, get a free consultation from a bankruptcy lawyer.

How Much Will I Need To Pay for the Services of a Bankruptcy Lawyer? 

In most cases, a bankruptcy lawyer will charge a flat fee for a bankruptcy filing. How much in total you need to pay in legal fees depends on how complex your case is, what Chapter you file under, the number of court hearings the process requires, etc.

The cost of a bankruptcy filing under Chapter 7 can range from $1,000 to $3,5000, based on the specifics of the case. Filing under Chapter 13 is typically more expensive.

Paying hourly rates may also be an option — but these are quite rare in consumer bankruptcy proceedings. You should be ready for your lawyer to charge extra for any additional work needed on your case. Hourly rates for additional services range from $300 to $500 per hour. 

How To Save Money on Bankruptcy Filing Fees?

In most cases, you are charged a flat rate for a package of bankruptcy filing services. As this involves multiple services (case evaluation, paperwork filling, paperwork filing, attending court hearings, etc.), the costs of having legal representation in a bankruptcy filing case can be quite high. If you need a bankruptcy lawyer to oversee your entire case, these costs will probably be unavoidable.

However, you may only need legal help with specific aspects of your case (for instance, attending a court hearing), so you may be a good candidate for using unbundled legal services. This service is known as a limited legal services program, and unbundled legal services let you pay only for the legal services you need, instead of a full-service package. As a result, you can cut costs significantly, bringing your overall expenses down to as low as $500 to $1500.

Unbundled legal services may not be the best option if you have a complex bankruptcy filing case and full legal representation is required. But you can still consult one of the lawyers we work with in search of full representation. At Unbundled Legal Help, we work with a lot of smaller legal firms and solo practitioners and you may be able to benefit from their lower legal fees.

We can connect you today to an unbundled local bankruptcy lawyer to discuss your case.

Related Blog Posts

Ready to Talk to a Lawyer?

Receive a free consultation with a more affordable lawyer in your local area