If I File for Bankruptcy Will I Lose My House?
Home ownership is important way to grow and protect your wealth. But what happens when you run into financial difficulty? If I File for Bankruptcy Will I Lose My House?
First of all, Ohio law protects an individual’s equity in a primary home, as of 2025, in the amount of $161,375, and for a married couple $322,750.
This means that if you have equity in this amount or less the bankruptcy court cannot take your home to satisfy your debts. Keep in mind this amount is over and above your mortgage balance on your home.
If I File for Chapter 7 Bankruptcy Will I Lose My House?
To keep your home in a Chapter 7 you should be current on your house payments or nearly so. So long as you are reasonably current on your mortgage and your house is not worth an amount more than the above exemptions beyond your mortgage balance, you will be able to keep your house.
We have found that when our clients discharge their unsecured debts, and possibly surrender a vehicle they no longer want with a hefty payment, this frees up the cash necessary to stay current on their house payment.
If you wish to keep your home, which is almost always the case with the recent rapid appreciation in home prices, the bank will want you to sign a reaffirmation agreement. This agreement simply re -obligates you on your mortgage under its current terms and conditions. In the rarer case where your loans exceed the value of your house, you have the choice to surrender the house back to the bank and discharge any loan balance .
What if I am months behind in my mortgage payment, can I keep my house?
Yes, through a court ordered Chapter 13 plan. Typically, once you are three to four months in arrearage on your house, your bank will not work with you to catch up back payments. They will begin foreclosure proceedings and require a lump sum payment to get the mortgage current, plus attorney’s fees, court costs and late fees. This often ends up being an insurmountable sum which grows daily.
Once you file a chapter 13 plan with provisions to catch up your mortgage payment over time, the bank is bound by this federal law, and has to stop the foreclosure on your house and accept these payments.
You may file a chapter 13 plan to stop a foreclosure and catch up your back payments any time before the sheriff’s auction of your property. Once the property is sold at sheriff’s auction, it’s too late salvage it with a chapter 13 plan.
A chapter 13 plan will allow you to reduce your payments to other creditors which will free up cash to catch up your back mortgage payments and also stay current going forward on your mortgage. You can see where reducing your payments to unsecured creditors, often at a fraction of what you owe, and with no interest, and possibly reducing your payments on your vehicles, frees up cash for you to stay current on your mortgage and catch up back payments. Preserving your home is an important way of protecting and growing your wealth.
Speaking of preserving your wealth, we all too often see clients cash in their 401K and IRA to catch up back mortgage payments. This is almost always a mistake. You will be required to pay taxes on these distributions plus a 10% penalty for early withdrawal. Talk with us first.
These retirement assets are fully protected by your bankruptcy exemptions. Given the magic of compounding, your retirement accounts will be worth a great deal of money by retirement age. Do not destroy this by cashing in these accounts and paying taxes on them.
Both Chapter 7 and Chapter 13 bankruptcy cases will protect these retirement accounts and get rid of your unsecured debts. These retirement accounts will become very valuable through the magic of compounding over time. Do not cash these in without talking to us first to explore a better solution!
Will I Lose My House? Contact Keegan for More Information
Call 513-752-3900 to schedule a free consultation. We will give you plenty of time to discuss your individual circumstance with an experienced bankruptcy lawyer. We offer fair fees, payment plans, easy parking and two convenient locations: Eastgate, Clermont County & Middletown, Ohio. Since 1992, Keegan & Company Attorneys has helped thousands of your neighbors protect assets and gain financial peace of mind.
