If you’re drowning in debt and considering bankruptcy, one big question probably keeps you up at night: “Can I file bankruptcy and keep my house?” The answer? It’s often yes, but it depends on your situation, the type of bankruptcy, and a few key factors. At Monohan & Monohan, we’ve helped countless Ohio and Kentucky residents navigate this process, and we’re here to break it down in a way that’s easy to understand. Let’s explore how you can protect your home while getting a financial fresh start!
Bankruptcy Doesn’t Automatically Mean Losing Your Home
Filing for bankruptcy doesn’t mean you’ll lose your house. Both Chapter 7 (liquidation) and Chapter 13 (repayment plan) offer ways to keep your home, thanks to tools like exemptions and repayment plans. The key is understanding how each chapter works and whether your home’s equity and mortgage status fit the rules. With the right strategy, you can often stay in your home while tackling overwhelming debt. Let’s dive into how Chapter 7 and Chapter 13 handle your house and what factors determine if you can keep it.
Keeping Your House in Chapter 7 Bankruptcy
Chapter 7 wipes out most unsecured debts (like credit cards or medical bills) but involves selling non-exempt assets to pay creditors. Here’s how your house fits in:
- Homestead Exemption: In Kentucky, the homestead exemption allows you to protect up to $46,350 of equity in your primary residence (as of 2025, adjusted periodically), whereas Ohio is a little different. Equity is your home’s value minus your mortgage balance.
- Example: If your home is worth $200,000 and you owe $160,000, your equity is $40,000. Since this is below the $46,350 exemption, you can likely keep your house.
- If your equity exceeds the exemption, the bankruptcy trustee might sell your home to pay creditors, but this is rare with proper planning.
- Mortgage Payments: You must stay current on your mortgage. If you’re behind, Chapter 7 doesn’t offer a way to catch up, so you’ll need to negotiate with your lender or consider Chapter 13.
- “Reaffirming” the Mortgage: To keep your home, you may sign a reaffirmation agreement, committing to continue mortgage payments. This keeps the loan intact, but you remain personally liable for the debt.
Bottom Line: Chapter 7 works best if you have low equity, are current on payments, and qualify for Kentucky’s homestead exemption.
Keeping Your House in Chapter 13 Bankruptcy
Chapter 13 is often called the “save your home” bankruptcy because it lets you reorganize debts through a 3- to 5-year repayment plan. Here’s how it helps:
- Catch Up on Missed Payments: If you’re behind on your mortgage, Chapter 13 allows you to spread arrearages (past-due amounts) over the repayment plan while keeping up with regular payments.
- Protect High Equity: If your home’s equity exceeds the homestead exemption, Chapter 13 lets you keep your house by paying creditors the equivalent value of non-exempt equity through the plan.
- Lien Stripping: In some cases, you can remove second mortgages or home equity loans if your home’s value is less than your primary mortgage balance, reducing your debt load.
Bottom Line: Chapter 13 is ideal if you’re behind on payments or have significant home equity, as it gives you time to catch up and protect your property.
Factors That Affect Keeping Your House
Whether you file Chapter 7 or Chapter 13, several factors determine if you can keep your home:
- Home Equity: Low equity (within the state’s homestead exemption) makes it easier to keep your house in Chapter 7. High equity may require Chapter 13 to protect it.
- Mortgage Status: Being current on payments is critical for Chapter 7. If you’re behind, Chapter 13’s repayment plan can help you catch up.
- Income and Budget: Chapter 13 requires enough income to cover your repayment plan, including mortgage payments and living expenses.
- Other Liens: Tax liens or judgments against your home can complicate things. An attorney can help resolve these in bankruptcy.
Every case is unique, so consulting a bankruptcy attorney is crucial to assess your specific situation.
Tips to Protect Your Home in Bankruptcy
Want to improve your chances of keeping your house? Here are practical steps:
- Work with a Bankruptcy Attorney: An experienced lawyer can maximize exemptions, negotiate with lenders, and choose the right chapter for your goals.
- Stay Current on Mortgage Payments: Even in bankruptcy, timely payments show lenders you’re committed to keeping your home.
- Get a Home Appraisal: Knowing your home’s current value helps calculate equity and plan exemptions accurately.
- Complete Credit Counseling: Bankruptcy requires a pre-filing credit counseling course, which can also help you budget for mortgage payments post-bankruptcy.
At Monohan & Monothan we guide you through these steps with personalized advice tailored to your financial situation.
What If You Can’t Keep Your House?
In rare cases, keeping your home may not be feasible, for example, if you have too much equity in Chapter 7 or can’t afford Chapter 13 payments. If this happens:
- Surrender the Home: You can let the house go in bankruptcy, discharging any remaining mortgage debt (if applicable).
- Explore Alternatives: Options like loan modification, refinancing, or selling the home before filing might help you avoid bankruptcy altogether.
- Plan for Relocation: If you surrender your home, bankruptcy can still provide a fresh start by wiping out other debts, freeing up funds for new housing.
Our team at Monohan & Monohan can explore all options to find the best path forward, whether that’s keeping your home or starting anew.
Ready to Protect Your Home?
Monohan & Monohan Can Help
Filing bankruptcy doesn’t have to mean losing your home. With the right strategy, Chapter 7 or Chapter 13 can help you keep your house while shedding overwhelming debt. At Monohan & Monohan our Ohio & Kentucky-based bankruptcy attorneys have decades of experience helping clients protect what matters most. We’ll review your home’s equity, mortgage status, and finances to create a plan that works for you.
Wondering if you can keep your house? Contact us today for a free consultation. Let’s secure your home and your financial future together!
