Here is some introductory information on the effects filing for Chapter 7 bankruptcy will have on your home.
It’s in your best interest to continue making mortgage payments on your home even if you will be filing for Chapter 7 bankruptcy, unless you are attempting to discharge your mortgage and have accepted that you will be losing your home. Until the mortgage is paid off, the lender will be able to foreclose on your home and filing for Chapter 7 doesn’t change this.
Bankruptcy does not get rid of liens on your house that were made with your knowledge and consent, nor will it eliminate tax liens or mechanics’ liens. Judgment liens may be eliminated if you file a motion to avoid a judicial lien with the bankruptcy court. For example, if a creditor filed a lawsuit against you and received a judgment allowing them to record a deed on your home, you may be able to get rid of that lien completely.
Can You Keep Your Home?
In most cases, filing for Chapter 7 bankruptcy means you will lose your home to help pay for your outstanding debts if there is any equity in your home. Whatever money is left over after the mortgage, liens, sale cost, and taxes will go to your creditors to pay your debts (unless a “homestead exemption” lets you keep some of the equity). On the other hand, if there is no equity in your home, the bankruptcy courts will most likely not sell it and it will go through the normal foreclosure process if you are unable to keep up with mortgage payments. Filing for Chapter 7 or Chapter 13 bankruptcy does delay foreclosure for some time through the automatic stay, but it is only temporary and your creditor can file a motion to have the stay lifted.