Will I lose my house or car if I file bankruptcy?

The key idea: equity and exemptions

What matters is your equity: what the property is worth minus what you owe on it.

Exemptions are laws that protect a certain amount of equity. Each state has its own list, and some states let you choose the federal list instead. For example, the federal exemptions protect $31,575 of home equity and $5,025 for one vehicle, plus a "wildcard" of $1,675 for any property (amounts per person, in effect since April 1, 2025). Some states protect far more home equity; a few, like Texas and Florida, protect a homestead regardless of its value, within acreage limits.

See your state's rules in our state-by-state guides.

Your house in Chapter 7

• If your equity is covered by your homestead exemption and you are current on the mortgage, you keep the house. Keep making your payments as usual.
• If your equity is more than the exemption, the trustee can sell the house, pay you the exempt amount in cash, and use the rest for creditors. Trustees usually only do this when there is enough unprotected equity left after sale costs (often around 10% of the price) to make it worth it.
• If you are behind on the mortgage, the automatic stay pauses a foreclosure, but only temporarily. Chapter 7 does not let you catch up on missed payments, so the lender can usually continue the foreclosure after the case or ask the court for permission sooner.
• Your personal liability ends: if you decide to give up the house, the discharge wipes out what you would otherwise owe after a foreclosure sale.

If you bought your home within about 40 months (1,215 days) before filing, federal law may cap your homestead exemption at $214,000, even in states with a higher or unlimited exemption. If you moved to your state within the last 2 years, you may have to use the exemptions of the state you lived in before.

Your house in Chapter 13

Chapter 13 is the main tool for saving a house from foreclosure. Filing stops the foreclosure, and your plan lets you pay the missed payments over 3 to 5 years while you keep up with regular payments. You keep the home even if your equity is more than the exemption, but your plan must pay unsecured creditors at least as much as they would have received if the unprotected equity had been sold in Chapter 7.

Chapter 13 can also remove a second mortgage or home equity line in some cases. If your home is worth less than you owe on the first mortgage, a second mortgage can be treated as unsecured debt ("lien stripping").

Your car

In Chapter 7: three choices for a car with a loan

You state your choice on Official Form 108, Statement of Intention:

• Reaffirm the loan. You sign an agreement to keep paying, and the debt survives bankruptcy. The court reviews it, and you can cancel it within 60 days after it is filed. Only reaffirm if you can truly afford the payments.
• Redeem the car. Pay the lender the car's current value in one lump sum, and you own it outright. This helps when you owe much more than the car is worth.
• Surrender the car. Give it back. The discharge wipes out whatever you would still owe.

If the car is paid off, it is safe as long as its value is covered by your vehicle exemption (plus a wildcard exemption, if your state has one).

In Chapter 13

You keep the car and pay the loan through your plan. If you bought the car more than 910 days (about 2½ years) before filing and owe more than it is worth, you may only have to pay its current value, often at a lower interest rate (a "cramdown"). If you are behind, you can catch up over the plan.

Leased cars

You can keep a leased car by "assuming" the lease, which you state on Schedule G and Form 108. You then keep making the lease payments.

If you rent

Filing stops most eviction cases for a short time, but it does not cancel the rent you owe going forward. If your landlord already has a judgment for possession, you must file extra forms (101A and 101B) and may need to deposit rent with the court to stay. Unpaid back rent is usually wiped out in Chapter 7, and you can keep your lease by staying current.

Mistakes to avoid before filing

• Do not transfer property (such as putting a car or house in a relative's name) to protect it. The trustee can undo transfers, and it can cost you your discharge.
• Do not pay back family or friends in the year before filing. The trustee can recover those payments from them.
• Do not take on new debt or make large purchases on credit right before filing.
• Get a realistic value for your home and car (for example, from a recent appraisal, comparable sales, or a car pricing guide). Overvaluing or undervaluing can cause problems.