Can I keep my home after filing chapter 7?

Chapter 7, or total liquidation bankruptcy, normally does two things: it requires you to liquidate assets and, in turn, it liquidates debt. During the chapter 7 process:

• You must list all assets of value for the court. Those assets that aren't exempt are then taken as part of the filing and sold in a sheriff's sale to generate cash to pay off debts you owe
• Any eligible debt (which is most debt, except for student loans, tax debt and child support debt) is forgiven once the money from the sale of your stuff is divided up among the creditors. 

Because of this, you may wonder what the chapter 7 mortgage rules are and whether or not you can keep your home. The answer is, it depends. Most states do have homestead exemptions which allows you to avoid counting some or all of your home equity as an asset that must be seized. This means you can keep this equity in your house. However, chapter 7 isn't going to discharge your mortgage and you need to get current on your mortgage payments and either stay current or arrange a deal with your lender that allows you to restructure the debt and keep your home. Chapter 7 isn't a restructuring bankruptcy, so you'll have to work with creditors to arrange a deal.

If you want to keep your house during chapter 7 bankruptcy, you need to talk to a lawyer. Your attorney can explain your options and can help you to determine the best way to proceed with the aim of protecting your house.