Can I File for Bankruptcy and Keep My House?

Financial situations can often lead to concerns about the protection of property. When you are struggling with debt, there are options to protect both your assets and your home. The strategy you choose to help relieve the burden of debt will depend on your financial situation and what best suits your needs.

Fortunately, bankruptcy laws include provisions to help you protect certain assets, such as your home. Whether you are filing Chapter 7 or Chapter 13 bankruptcy, understanding the rules and exemptions that pertain to debtors in Pennsylvania helps you navigate the process while safeguarding your property.

Will I Lose My House If I File Chapter 13?

Chapter 13 bankruptcy can serve as a way to delay foreclosure or even reduce high interest unsecured debt and tax debt. You can keep your home when filing Chapter 13 bankruptcy. However, you must make on-time payments, as required through this type of filing. Failing to make your Chapter 13 bankruptcy payments can put your home back at risk.

Through Chapter 13 bankruptcy, debtors are required to make a debt repayment plan, which shows how you will pay off past-due and current debts over a duration of time. Chapter 13 specifically allows you to protect valuable property that might be lost under Chapter 7. For example, under Chapter 13, debtors can protect a certain amount of equity in their primary residence from liquidation.

Filing for bankruptcy also allows time to determine whether it would be best to sell your home to help pay back debt.   

Will I Lose My House If I File Chapter 7?

Through Pennsylvania state exemptions, most people filing for Chapter 7 bankruptcy will be able to protect their home, so long as they have enough equity protected.  

Chapter 7 bankruptcy filing requires debtors to ask the courts to discharge most or all unsecured debts. Debt is discharged in exchange for giving up property, aside from exempt property. Chapter 7 bankruptcy is also referred to as liquidation bankruptcy due to its method of relieving debt.   

If you are concerned about losing your home when filing for Chapter 7 bankruptcy, consult with your bankruptcy attorney to discuss and determine whether your home is protected.  You must be careful filing for Chapter 7 bankruptcy while owning a home today due to the strong housing market pushing up prices in recent years.     

Bankruptcy and Foreclosure

One of the primary concerns for homeowners struggling to make payments and relieve debt is the risk of foreclosure. Both Chapter 7 and Chapter 13 can provide relief from foreclosure.

If foreclosure is imminent, filing for bankruptcy puts an automatic stay into place. This means that lenders cannot proceed trying to get back debt owed until the bankruptcy case is complete. Through the bankruptcy case itself, homeowners may find other options that allow them to further protect their home and prevent foreclosure from beginning.

Pennsylvania Bankruptcy Exemptions

Pennsylvania allows filers to choose between state and federal bankruptcy exemptions. The primary exemption that applies to protecting your home is the Homestead Exemption. While Pennsylvania does not have a homestead exemption on the state level, there is a federal option. Federal bankruptcy exemptions allow for an exemption of $27,900 for individuals or $55,800 for spouses who co-own property under the homestead exemption.  In addition, there are ways to protect unlimited amounts of home equity if the home is held maritally in Pennsylvania.  

How to File for Bankruptcy and Keep Your house

Filing for bankruptcy is best done with the aid of an experienced bankruptcy attorney. A bankruptcy attorney is well-versed in state and federal regulations. They also come to the table with years of experience handling different cases of financial situations. Before filing for bankruptcy, your attorney will help you determine which type of filing is best, or if there is an alternative to filing that is available to you. Hiring a bankruptcy attorney gives you the best chance at keeping your house and protecting the rest of your assets.