How to File for Bankruptcy and Keep Your House

What Virginia Homeowners Need to Know

Many people hesitate to consider bankruptcy because they’re afraid they’ll lose their home. The good news? Filing for bankruptcy doesn’t automatically mean losing your house. In fact, for many Virginia homeowners, bankruptcy is the tool that helps them keep their home—especially when facing foreclosure, mounting debt, or overwhelming financial stress.

Here’s what you need to know about how to file for bankruptcy and keep your house, and how our office helps homeowners protect their most important asset.

Can You Keep Your Home in Bankruptcy?

Yes, most homeowners can keep their home in bankruptcy. Whether you file Chapter 7 or Chapter 13, the key factors are:

• How much equity you have in the property

• Whether that equity is protected by Virginia’s exemption laws

• Whether you are current on your mortgage

• What kind of bankruptcy you file

Key Factors That Determine If You Can Keep Your Home

1. How Much Equity Do You Have?

Equity is the difference between what your home is worth and what you owe on your mortgage(s). We an typically can also reduce the equity by a reasonable cost of sale. For example:

Fair Market Value of House: $600,000
Mortgage: $450,000
Estimated Cost of Sale: $54,000
Equity: $96,000

Equity is important because only protected/exempt equity is safe in bankruptcy. Unprotected equity may be at risk in Chapter 7, but can often be managed in Chapter 13.

2. What Exemptions Protect Your Equity?

Virginia offers several ways to protect home equity in bankruptcy:

• Homestead Exemption: $50,000 per owner (as of July 2024)

• Tenants by the Entirety (TBE): If you own the home jointly with your spouse and you don’t have joint unsecured debts, creditors and trustees cannot touch the home.

• Wildcard Exemption: $5,000 per filer (higher for seniors or disabled veterans), which can also be used to protect home equity if needed.

Important: If you’ve lived in Virginia for less than 2 years, your exemptions may be different based on federal law.

3. Are You Behind on Your Mortgage?

• If you’re current on your mortgage: Chapter 7 or Chapter 13 may work.

• If you’re behind on mortgage payments: Chapter 13 is usually the better option, because it allows you to catch up over time and stop foreclosure.

Keeping Your House in Chapter 7 Bankruptcy

Chapter 7 is a liquidation bankruptcy, but that doesn’t mean your house is automatically sold. You can keep your house if:

• Your equity is fully protected by exemptions.

• You’re current on mortgage payments.

• You can afford to continue making your payments after discharge.

However, if your equity exceeds the available exemptions, the bankruptcy trustee may sell the house to pay creditors—unless you switch to Chapter 13.

Example: A couple owns a home with $125,000 in equity. With a $50,000 homestead exemption and $5,000 wildcard each, they could only protect $110,000. Rather than risk losing the home, they file Chapter 13 to protect the full amount.

Keeping Your House in Chapter 13 Bankruptcy

Chapter 13 is a repayment plan, not a liquidation. It’s often the best option for:

• Homeowners behind on mortgage payments

• People with too much equity for Chapter 7

• Those facing imminent foreclosure

With Chapter 13, you can:

• Catch up on mortgage arrears over 3 to 5 years

• Stop foreclosure immediately with the automatic stay

• Possibly eliminate second mortgages through lien stripping (if certain conditions are met)

Example: A homeowner is $30,000 behind on mortgage payments due to job loss. Chapter 13 allows them to repay that over 5 years while keeping the house—and the foreclosure is stopped the day the case is filed.

What If Foreclosure Has Already Started?

Bankruptcy can stop a foreclosure at the last minute—even if the sale is scheduled for the next day. The moment you file, the automatic stay goes into effect, stopping creditor actions like foreclosure, repossession, or wage garnishment.

However, waiting too long to act can reduce your options. Once the home is sold at auction, bankruptcy can’t reverse the sale. Timing matters.

Other Homeownership Considerations in Bankruptcy

• Property Taxes and HOA Dues: Can be included in Chapter 13 and paid over time.

• HELOCs and Second Mortgages: Can be stripped in Chapter 13 if they’re wholly unsecured.

• Investment Properties: Not protected in the same way—different rules may apply.

• Selling the Home Post-Bankruptcy: Can be done, but equity protection still matters.

When Bankruptcy May Not Let You Keep Your Home

Even though bankruptcy is a powerful tool, there are situations where keeping the home isn’t feasible:

• Your equity exceeds exemption limits and you can’t switch to Chapter 13.

• You’re unable to afford the mortgage, even in a repayment plan.

• You transferred the home recently or improperly (e.g., gave it to a family member to “protect it”—this can be undone by the trustee).

• You have tax liens or HOA judgments exceeding the value of the home (and are substantially behind on the mortgage).

That’s why it’s important to meet with a qualified attorney who can walk through your options before you file.

How We Help Virginia Homeowners Protect Their Homes

At Ashley F. Morgan Law, PC, we help people throughout Northern Virginia and beyond navigate bankruptcy with their home in mind. We’ll evaluate:

• Your equity and exemptions

• Your mortgage status

• Your overall financial picture

• The best chapter for your goals

If keeping your home is a top priority, we’ll make a plan to help you do exactly that—or help you walk away without unnecessary consequences, if keeping it isn’t the best financial choice.

FAQs

Can I refinance after bankruptcy?
Yes—most people can refinance their mortgage (or get a new mortgage) 2 years after Chapter 7 or 1 year into the Chapter 13, depending on lender guidelines.

What if I want to give up my house?
You can choose to surrender your home in bankruptcy and wipe out the debt, even if you’re underwater on the mortgage.

Do I have to reaffirm my mortgage in Chapter 7?
No—most lenders don’t require reaffirmation. You can usually keep the home and continue making payments under “retain and pay.”

What if my spouse isn’t filing?
That’s fine. We’ll help you understand how joint ownership and individual filing affects your situation.

Bankruptcy Isn’t About Losing Your Home—It’s Often About Saving It

Bankruptcy isn’t just a fresh start—it can also be a way to protect what matters most. If you’re overwhelmed by debt but want to keep your house, you’re not alone—and you have options.

Let our experienced legal team help you find the best path forward. Schedule a consultation today.