Can You Keep A House In Bankruptcy?

You may have concerns about how filing for bankruptcy affects your home and whether you can keep it. Bankruptcy can be stressful and overwhelming for those involved, but understanding your options and working with a bankruptcy attorney can help you make informed decisions about your home and financial future.

Is it possible to keep your home in bankruptcy? What are your options? First, you need to know about the types of bankruptcy you can file.

The Types Of Bankruptcy

There are two main types of bankruptcy that individuals can file for: Chapter 7 and Chapter 13. Chapter 7 bankruptcy states that you may be able to discharge your debts and potentially keep your home, depending on your state’s exemptions and your property’s value. 

In Chapter 13 bankruptcy, trustees may allow you to keep your home by reorganizing your debts and paying them off over three to five years.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy allows you to sell some of your property to pay off your debts. It is ideal for those with a limited income and struggling to pay.

If you file for Chapter 7 bankruptcy and have home equity, the bankruptcy trustee may sell your house to pay off your creditors. However, Texas has exemptions that may allow you to keep some or all of the equity in your home. Working with a bankruptcy attorney to determine what exemptions apply in your case is essential.

Suppose you cannot exempt all of the equity in your home. In that case, you may opt to negotiate with the bankruptcy trustee to keep your home by agreeing to pay the value of the non-exempt equity over time. This is known as a buyback. But what if you cannot negotiate a buyback? In that case, you can keep your home if you can pay off the non-exempt equity within a specific timeframe, usually within a few months.

Chapter 13 Bankruptcy

Conversely, Chapter 13 bankruptcy is the option to consider if you want to keep your property and pay off your debts with a court-mandated repayment plan.

If you file for Chapter 13 bankruptcy, you reorganize your debts and pay them off over three to five years to keep your home. In this type of bankruptcy, you propose a repayment plan to the bankruptcy court outlining how to pay off your debts. The court must approve your repayment schedule and include your mortgage payments. 

How To Keep Your Home In Bankruptcy

If you are current on your mortgage payments, you must continue making them as part of your repayment plan. However, if you are behind on them, you can catch up on payments throughout the repayment plan that the court has mandated upon you. That said, there’s also the possibility of foreclosure.

In that case, bankruptcy may help you keep your home by stopping foreclosure. An automatic stay goes into effect after filing for bankruptcy. This prevents creditors from taking any action to collect debts from you. This includes foreclosure of your home. 

However, it is essential to note that the automatic stay is temporary. Your lender may be able to ask the court to lift the stay if they can show that you are not likely to be able to catch up on your mortgage payments.

What If Your Case Gets Dismissed?

In some instances, homeowners who filed for bankruptcy had trouble keeping up with mortgage and debt payments, even with a well-thought-out repayment plan. Their cases were dismissed and no debts were discharged. If this happens to you, then you will need to settle payments as before.

It is crucial to have an experienced bankruptcy attorney who can help you navigate the bankruptcy process. They can help ensure that you are taking the necessary steps to increase the chances of getting a bankruptcy discharge.

How Bankruptcy Affects Getting A New Mortgage

Lenders and mortgage investors will require you to have the bankruptcy discharged or dismissed before you can apply for a new loan. In other words, getting a mortgage while in bankruptcy may not be possible.

Nevertheless, you can get a new mortgage after bankruptcy if you choose. Doing so has certain conditions that you will need to take into account.

Mortgage After Bankruptcy

Getting a mortgage after bankruptcy is possible if you qualify. Just like getting a loan, you must ensure your credit is good. This may pose a challenge since the bankruptcy will remain on your credit report for up to ten years. 

Individuals looking to get a new mortgage after a Chapter 7 bankruptcy must wait until two years after discharge. Some lenders may offer a new mortgage even before the two-year period is over with specific terms and conditions.

Those who filed for Chapter 13 bankruptcy can get a conventional mortgage at least two years before the date of inquiry, with a four-year waiting period until they have their credit pulled. For both types of bankruptcy, you must wait a few more years after discharge before getting a new mortgage. It will save you time and money, and the wait will allow you to rebuild your credit.

Bankruptcy Exemptions In Texas

Texas has a set of exemptions that protect property, namely a home when filing for bankruptcy. The conditions of exemptions in Texas depend on the following:

  • The value of your properties.
  • If the type of property falls under the Texas exemption.
  • Where the assets are located.

Whether you file for Chapter 7 or Chapter 13 bankruptcy, exemptions cover and protect any property as long as they meet the criteria. Whichever bankruptcy type you choose, Texas provides several generous exemptions, like a homestead exemption, to protect your property.

What Is Texas Homestead Exemption?

Aside from the federal exemption, Texas residents can keep their homes with a Texas homestead exemption even in bankruptcy. While you cannot mix both exemptions to protect your home, the Texas homestead exemption provides good options.

A Texas homestead exemption allows you to protect the equity in your principal residence. The exemption protects any property 10 acres or less in a city and up to 100 acres or less in rural areas.

What the State of Texas considers to be protected property includes your primary residence. It includes any improvements and amenities such as swimming pools, pumps, roads, water towers, and sheds. Claiming your homestead exemption requires that you list it when completing your bankruptcy forms, all while meeting other requirements.

If you’re a Texas resident, looking into exemptions that fit your needs is important. While a federal exemption is one option to keep your house in bankruptcy, you can always use the Texas homestead exemption. Be sure to get in touch with a bankruptcy attorney for advice.

Should You Keep Your House When Filing For Bankruptcy?

Anyone would want to keep their house, even when filing bankruptcy, as it is an essential asset and a basic need. While that may be true, there are also some downsides to keeping your house while going through a bankruptcy proceeding.

  • With Chapter 13 bankruptcy, you will still need to make your monthly mortgage payments, including payments you fell behind. This adds to payment challenges, even with the ease of the payment plan that you, the court, and your lenders agree to.
  • It’s also worth noting that sticking to a payment plan for three to five years is challenging. Modifications to payment plans involve going back to court and giving a good enough reason that you need one.
  • For Chapter 7 bankruptcy, you must still make monthly payments. Since you end up selling your assets to settle debts, leaving you with little left, keeping up with mortgages can be difficult.

Be sure to weigh your options carefully. Consult with an experienced bankruptcy attorney to understand which option is suitable for your situation. 

Keeping Your Home With The Help Of A Bankruptcy Attorney

Bankruptcy has some repercussions for your home. The conditions that bankruptcy brings may prove to be too heavy if you are still recovering financially. With exemptions, you can keep your home and other important assets.

If you are considering bankruptcy as a way to keep your home, be sure to work with a bankruptcy attorney, so you can understand your options and make appropriate decisions for your financial future. 

Bankruptcy can be complex, and an experienced attorney can help you navigate the process and protect your interests. In case you have any additional questions about keeping your home in bankruptcy, you may contact Lincoln-Goldfinch Law and speak with a bankruptcy attorney.


In general, you should be able to keep your house in bankruptcy. It’s possible that in Chapter 7 bankruptcy, trustees will not find it necessary to sell off your home to settle your debts. In Chapter 13 bankruptcy, what matters is that you are able to make your monthly payments, so losing your house is not a concern. Additionally, you may apply for exemptions under Texas law.

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