Will I Lose My House If I File for Bankruptcy?

For most people, the thought of filing for bankruptcy comes with one pressing question: “Will I lose my home?” It’s a scary prospect—your home isn’t just a financial asset, it’s your safe space, your biggest investment, and filled with memories. At Whitten & Whitten, we know how stressful this can feel, but here’s the reassuring truth: filing for bankruptcy doesn’t automatically mean losing your home.

The outcome depends on your unique circumstances and the type of bankruptcy you file. This post will walk you through the details, helping to clarify the process. We’ll also show how working with the right attorney can make all the difference.

Will You Lose Your Home?

Two primary types of bankruptcy are available to individuals in Indiana: Chapter 7 and Chapter 13. Each functions differently and offers varying protections for your home.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy involves liquidating eligible assets to repay creditors. It’s quicker than Chapter 13 and often appeals to those with significant unsecured debts, like credit card balances or medical bills. However, this process can pose challenges for homeowners.

Can You Keep Your House in Chapter 7?

Whether you can keep your house depends on three critical factors:

1. Indiana’s Bankruptcy Exemptions

Indiana law allows homeowners to protect up to a certain amount of their home’s equity using the Indiana Homestead Exemption. This exemption applies to your primary residence, including traditional homes, condos, or even mobile homes. This threshold amount increases if you’re married and jointly filing for bankruptcy.

However, if your home equity exceeds these amounts, the bankruptcy trustee may sell your home to pay creditors, though you would receive the exempt amount back.

2. Your Mortgage or Collateral

If your home is collateral for a mortgage or another loan, you must stay current on payments to avoid foreclosure. Chapter 7 does not remove your obligation to pay secured debts if you want to keep the associated asset.

3. Residency Requirements

You must have lived in Indiana for a certain amount of time before filing to use Indiana’s property exemptions. Otherwise, exemptions from your previous state of residence will apply.

Chapter 13 Bankruptcy

What Is Chapter 13?

Instead of selling assets, Chapter 13 allows you to create a 3- to 5-year repayment plan for your debts, making it a popular choice for homeowners who want to keep their property.

Why You’re Less Likely to Lose Your Home in Chapter 13

• No Asset Liquidation

With Chapter 13, you keep all your property, including your home, as long as you follow the repayment plan.

• Catch Up on Payments

Chapter 13 lets you pay off arrears (missed mortgage payments) throughout your plan. This can prevent foreclosure even if you’ve fallen behind on your mortgage.

• Protection From Lender Actions

Filing for Chapter 13 triggers an automatic stay, stopping foreclosure proceedings while the bankruptcy is active.

Chapter 13 may be a potential option for those prioritizing staying in their homes.

How an Attorney Can Help You Keep Your Home

Bankruptcy laws are complex, and while exemptions can provide protections, navigating them requires experience and precision. This is where an experienced attorney can make all the difference. Here are just a few ways an attorney can help you protect your home during bankruptcy:

1. Choosing the Right Bankruptcy Chapter

A bankruptcy attorney can look at your financial situation to determine whether Chapter 7 or Chapter 13 is best for helping you keep your home.

2. Maximizing Exemptions

Attorneys help you understand how to use state exemptions to protect your home equity and other personal property. If you’ve recently moved, they can explain eligibility timelines.

3. Preventing Foreclosure

For missed mortgage payments, an attorney can guide you through Chapter 13 strategies to stop foreclosure and create a manageable repayment plan.

4. Negotiating With Creditors

Bankruptcy attorneys can negotiate directly with lenders, exploring loan modifications or other solutions that help you retain your home.

5. Protecting Against Trustee Challenges

Attorneys check that your paperwork is accurate and defend your rights if a trustee challenges exemptions or flags potential issues.

6. Providing Peace of Mind

Beyond legal experience, bankruptcy attorneys serve as advocates and advisors, helping you navigate the process and answering your questions. With the right support, bankruptcy doesn’t have to be overwhelming.

Bankruptcy Doesn’t Automatically Mean Losing Your House

Filing for bankruptcy may feel like uncharted territory, but losing your home isn’t a sure thing. It all comes down to your financial situation, the bankruptcy chapter you choose, and the strength of your legal representation.

At Whitten & Whitten, we are passionate about helping Indiana homeowners protect their most valuable assets during bankruptcy proceedings. Contact us today if you’re considering filing and want to protect your home. Your home matters. We’ll help you fight for it.