Key Takeaways
- Homeowners often worry about losing their house when considering a bankruptcy claim, but it’s not always necessary.
- Bankruptcy may provide tools to protect a home, especially in Florida where strong homestead protections exist.
- Exemptions play a crucial role; they determine what property can be protected from creditors in a bankruptcy claim.
- In Chapter 7 bankruptcy, whether a homeowner keeps their house depends on the equity and applicable exemptions.
- Chapter 13 may help those behind on mortgage payments by creating a plan to repay arrears while keeping the home.
Estimated reading time: 9 minutes
For many people considering bankruptcy, their first concern is not their credit cards or medical bills. It is their home, which often plays a central role in a bankruptcy claim.
Will I lose my house if I file bankruptcy?
The answer is: not necessarily.
Many bankruptcy debtors are able to keep their homes. In fact, depending upon the circumstances, bankruptcy can sometimes provide important tools for protecting a home from creditors or stopping a pending foreclosure.
However, whether you can keep your house depends upon several factors, including the bankruptcy chapter you file, the amount of equity in the property, and the exemptions available to you. Other factors include whether you are current on your mortgage and how long you have owned and occupied the property.
For Florida homeowners, the analysis can be particularly important because Florida provides one of the strongest homestead protections in the country.
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What are bankruptcy exemptions?
When a person files bankruptcy, most of the debtor’s property becomes part of what is known as the bankruptcy estate.
That does not mean the debtor automatically loses that property.
Federal and state laws provide exemptions that allow debtors to protect certain property from creditors and, in a Chapter 7 case, from liquidation by the bankruptcy trustee.
Depending upon the applicable exemption laws, protected property may include some or all of a debtor’s interest in a home, vehicle, household goods, retirement accounts, personal property, and other assets.
Which exemptions apply can depend upon where the debtor has lived before filing bankruptcy. Under the Bankruptcy Code, the debtor’s domicile during the 730 days preceding the bankruptcy filing is important in determining which state’s exemption laws apply. If the debtor has not been domiciled in one state for that entire period, additional federal rules determine which state’s exemptions govern.
This is one reason why someone who recently moved to Florida should obtain legal advice before assuming that Florida’s exemptions will automatically apply.
Florida’s Homestead Exemption in Bankruptcy
Florida provides unusually strong protection for qualifying homestead property.
Article X, Section 4 of the Florida Constitution protects qualifying homestead property from forced sale by most creditors. Unlike the homestead exemptions in many other states, Florida’s constitutional homestead protection generally does not impose a dollar limit on the amount of equity that can be protected. This protection applies as long as the property otherwise qualifies.
This can make an enormous difference in bankruptcy.
For example, a Florida homeowner may potentially have substantial equity in a qualifying homestead without automatically exposing that equity to a Chapter 7 trustee merely because it exceeds a particular dollar amount.
However, Florida’s homestead protection is not unlimited in every respect.
Among other requirements, the Florida Constitution imposes acreage restrictions. Generally, the protected homestead may not exceed one-half acre when located within a municipality or 160 acres when located outside a municipality.
There are also exceptions to Florida’s constitutional protection. They include certain obligations involving property taxes, mortgages, and obligations associated with the purchase, improvement, or repair of the property.
Federal bankruptcy law can impose additional restrictions.
The Federal 1,215-Day Homestead Rule
One particularly important limitation appears in 11 U.S.C. § 522(p).
Even when state law would otherwise provide an unlimited homestead exemption, federal bankruptcy law may limit the amount of homestead equity that can be protected. This limit applies when the debtor acquired the relevant interest in the property during the 1,215 days immediately preceding the bankruptcy filing.
For bankruptcy cases filed on or after April 1, 2025, the adjusted amount under § 522(p) is $214,000, subject to the statutory requirements, exceptions, and the particular facts of the case.
This rule can become extremely important for someone who recently purchased a valuable Florida residence or transferred substantial nonexempt assets into a homestead before filing bankruptcy.
The application of § 522(p) can be complicated, so a homeowner with significant equity should have the property and acquisition history carefully reviewed before filing.
Can I Keep My House in Chapter 7 Bankruptcy?
Possibly.
Chapter 7 does not automatically require a debtor to surrender a home.
The first question is generally whether an applicable homestead exemption protects the debtor’s equity in the property.
Equity is roughly the difference between the property’s value and the valid liens against it.
For example, if a house is worth $450,000 and approximately $300,000 is owed on the mortgage, the homeowner has approximately $150,000 in gross equity before considering costs of sale and other relevant adjustments.
Whether that equity is protected depends upon the exemptions applicable to the particular debtor.
A qualifying Florida homestead may potentially protect substantial equity. But the analysis must also consider the debtor’s domicile, when the property was acquired, whether the property actually qualifies as the debtor’s homestead, acreage limitations, federal restrictions, and any other applicable exceptions.
This is why homeowners—especially those with significant equity—should have their exemption position analyzed before filing Chapter 7.
What If I Have a Mortgage?
A bankruptcy discharge eliminates personal liability for many debts, but it does not ordinarily eliminate a valid mortgage lien against real property.
This distinction is critical.
If you want to keep a mortgaged home after Chapter 7, you generally must continue satisfying the obligations necessary to retain the property. Bankruptcy does not ordinarily give a homeowner a free house or require a mortgage company to release its lien simply because the debtor received a discharge.
If mortgage payments are current and the debtor’s equity is fully protected, Chapter 7 may sometimes allow the debtor to eliminate other dischargeable debts while continuing to maintain the home.
Eliminating credit-card debt, medical bills, personal loans, and other qualifying obligations can sometimes make it easier for a homeowner to afford ongoing mortgage payments after bankruptcy.
What If I Am Behind on My Mortgage?
This is where Chapter 13 bankruptcy can become particularly important.
Chapter 7 generally does not provide a long-term mechanism for curing substantial mortgage arrears.
Chapter 13, on the other hand, may allow a qualifying homeowner to stop a foreclosure and repay past-due mortgage payments over the life of a bankruptcy plan while maintaining required post-petition mortgage payments.
For example, assume a homeowner is $25,000 behind on a mortgage but has resumed earning sufficient income to make the regular monthly mortgage payment.
Depending upon the circumstances, Chapter 13 may allow the homeowner to spread those arrears over a repayment plan rather than immediately paying the entire $25,000 to stop the foreclosure.
This can be one of the most powerful uses of Chapter 13.
However, simply filing Chapter 13 does not guarantee that the homeowner will keep the property. The debtor must propose a plan that complies with the Bankruptcy Code, demonstrate an ability to make the required payments, comply with the confirmed plan, and ordinarily remain current on required post-petition mortgage obligations.
How Does Home Equity Affect Chapter 13?
Home equity can also matter in Chapter 13, even though a Chapter 13 trustee ordinarily does not sell the debtor’s home.
One important requirement is sometimes referred to as the “best interests of creditors” or liquidation test.
In simplified terms, unsecured creditors generally must receive at least as much through the Chapter 13 plan as they would have received if the debtor’s nonexempt assets had been liquidated in a Chapter 7 case.
Therefore, if substantial home equity is not exempt, that equity may affect how much the debtor must pay unsecured creditors through the Chapter 13 plan.
If the equity is fully exempt, however, it generally does not create the same liquidation value for unsecured creditors.
This is another reason why exemption planning is important in determining whether Chapter 7 or Chapter 13 is appropriate.
Can Bankruptcy Stop a Foreclosure?
In many cases, yes—at least temporarily and sometimes as part of a longer-term solution.
Filing bankruptcy ordinarily creates an automatic stay, which stops most creditor collection actions immediately upon filing.
If a foreclosure case is pending, the automatic stay will ordinarily stop further foreclosure activity unless an exception applies or the mortgage creditor obtains relief from the stay from the Bankruptcy Court.
Chapter 13 may then provide a mechanism for curing mortgage arrears and maintaining the property.
Timing, however, is extremely important.
Someone facing an imminent foreclosure sale should not wait until the last moment to speak with a bankruptcy attorney. The legal options available before a foreclosure sale may be very different from those available after the sale has occurred.
Does Bankruptcy Eliminate My Mortgage?
Usually, no.
A bankruptcy discharge and a mortgage lien are different things.
Bankruptcy may eliminate a debtor’s personal liability for a mortgage obligation under certain circumstances, but a valid mortgage lien generally remains attached to the real property.
Therefore, if the homeowner wants to retain the property, the mortgage generally must still be addressed.
If the debtor instead decides to surrender the property, bankruptcy may potentially eliminate personal liability for a qualifying deficiency or other dischargeable mortgage debt, depending upon the circumstances.
What If I Don’t Want to Keep the House?
Bankruptcy can also help homeowners who determine that keeping the property no longer makes financial sense.
A homeowner may be severely underwater, facing unaffordable payments, dealing with major repairs, or simply unable to maintain the property.
In those situations, surrendering the home through bankruptcy may sometimes be part of a broader financial fresh start.
The debtor should nevertheless understand that surrendering property in bankruptcy does not itself transfer title to the mortgage company. Foreclosure, deed transfer, sale, or another legal process may still be necessary before ownership actually changes.
This distinction can have practical consequences involving homeowners’ associations, property maintenance, insurance, and other responsibilities.
Should I File Chapter 7 or Chapter 13 If I Own a House?
There is no universal answer.
A homeowner who is current on the mortgage, has fully exempt equity, and primarily needs relief from unsecured debt may potentially be a good candidate for Chapter 7.
A homeowner who is behind on mortgage payments and needs time to cure the arrears may benefit more from Chapter 13.
Chapter 13 may also be appropriate when a debtor owns property containing nonexempt equity that could be exposed in Chapter 7.
Before deciding, a bankruptcy attorney should evaluate:
- The current market value of the property;
- The mortgage balance and any other liens;
- The amount of equity;
- Whether the property qualifies as homestead;
- How long the debtor has owned the property;
- How long the debtor has lived in Florida;
- Whether the mortgage is current;
- Whether foreclosure proceedings have begun;
- Whether there are property-tax or homeowners’ association arrears;
- Whether federal homestead limitations may apply; and
- Whether Chapter 7 or Chapter 13 better accomplishes the debtor’s overall financial objectives.
Don’t Assume That Bankruptcy Means Losing Your Home
One of the most damaging misconceptions about bankruptcy is that filing automatically means surrendering everything you own.
That simply is not how bankruptcy works.
For many Florida debtors, a qualifying homestead can receive substantial protection. Bankruptcy may even provide the breathing room necessary to address mortgage arrears, eliminate other debts, and make keeping the home financially possible.
At the same time, homeowners with substantial equity should be particularly careful. Homestead exemption law is powerful but complicated, and mistakes made before filing can have serious consequences.
Juan C. Burgos, Attorney at Law
When people seek legal representation, they are often facing one of the most difficult moments of their lives. Whether they have been seriously injured, are struggling with overwhelming debt, or are fighting to protect a business they spent years building, they need more than legal advice. They need an attorney they can trust. For Juan Carlos Burgos, that trust is earned through preparation, honesty, accessibility, and an unwavering commitment to every client he represents. In 2003, he became co-owner and President of B.M.R. Medical Group, a successful medical practice dedicated to treating individuals injured in automobile accidents and other personal injuries. Juan then earned his Juris Doctor from Florida A&M University College of Law in 2009.
In September 2010, he founded The Law Offices of Juan C. Burgos, P.L., with one guiding mission: To provide exceptional legal representation while treating every client with honesty, compassion, professionalism, and respect.Today, he represents individuals, families, and businesses throughout Florida in matters involving personal injury, business litigation, Chapter 11 business reorganizations, Chapter 13 reorganizations, and Chapter 7 bankruptcy.
