Will I lose my home?

Home mortgages get special treatment in bankruptcy. The mortgage company gets extra protection, but the debtor also has certain special rights. In a Chapter 13 you have the absolute right to keep the house if you can do these two things: (1) Keep paying your regular house note (not including late fees) on time every month; and (2) pay back the full arrearage (the amount that you are behind at the time of filing), plus interest, over the next 3 to 5 years.

If you are filing a Chapter 7 and want to keep the house, the mortgage company has to agree to it first. Usually they will, if you are current on your house payments, or maybe only one or two payments behind. The farther behind you are, the less likely they are to agree to it. If you file a Chapter 7 hoping that the mortgage company will reaffirm, but they don’t, then you will lose the house.

If you want to surrender the house (or any other secured property), you have the absolute right to do that in both Chapter 7 and in Chapter 13. In a Chapter 7, you would also walk away from any debt which you might still owe on the house. (See section on Repossessions and Foreclosures for more discussion about what happens to the property and to the debt.) In a Chapter 13, you might still end up owing some money to the mortgage company, but it would no longer be a secured debt; it would become a general unsecured debt. (See FAQ on the Difference between Secured and Unsecured Debt.)