Will I Lose My Home If I File Chapter 7 Bankruptcy in Pennsylvania?

Bankruptcy has developed a nasty reputation, which is largely based on myths and misinformation. One of the most persistent (and harmful) bankruptcy myths is that you will automatically lose your home if you file for Chapter 7. While this is a possibility, the answer depends on a few critical factors. 

Chapter 7 is designed for people with limited financial resources and assets. A person’s home is usually their most valuable asset, though a mortgage generally encumbers it. How the house will be treated in a Chapter 7 bankruptcy depends on the property’s value and the remaining mortgage balance, if any. Chapter 7 may keep your home at risk, especially if your home is in foreclosure, making Chapter 13 the better choice to protect your house from creditors. 

For your free case assessment from our Pennsylvania bankruptcy lawyers, call Young, Marr, Mallis & Associates at (215) 701-6519 now. 

How Can an Automatic Stay Stop Me from Losing My Home if I File Chapter 7 Bankruptcy? 

It’s ironic that bankruptcy is associated with foreclosure, because a core component of bankruptcy, the automatic stay, actually protects filers against foreclosure, at least temporarily. So, what is the automatic stay, and how does it work? 

An automatic stay is a court order that automatically stops lawsuits, foreclosures, garnishments, and all collection activity against the debtor the moment a bankruptcy petition is filed. 

It may sound too good to be true, but its purpose is to give debtors some breathing room so that they can get their financial affairs in order while the bankruptcy case is in progress. 

Without the benefits afforded by the automatic stay, ceaseless collection actions could undermine cases by continually interfering with the debtor’s ability to get a fresh start. Creditor harassment is also prohibited by the Fair Debt Collection Practices Act (FDCPA). 

Can I Lose My Home During Chapter 7 Bankruptcy Despite the Automatic Stay? 

While the stay offers robust legal protection, Chapter 7 debtors should be advised that in some situations, creditors may be “granted relief” from the automatic stay with the court’s permission. If a creditor moves for relief from the stay, you will be notified and are entitled to attend the hearing, where you may argue your case with help from your legal representative. 

A mortgage company or lender might file for relief from the automatic stay for various reasons. If a homeowner is behind on mortgage payments, is in a foreclosure action, or has a home scheduled for a sheriff’s sale, filing Chapter 7 will stop all legal action against the property. 

However, while the automatic stay will prevent a creditor from foreclosing on a house, it may be temporary if the homeowner files Chapter 7, which requires liquidation of assets to repay creditors. 

Is the Risk of Losing My Home the Same in Chapter 7 and Chapter 13 Bankruptcy? 

Chapter 7 and Chapter 13 bankruptcy don’t put your home at risk in the same way. If your ultimate goal is to save a home in foreclosure, our experienced Philadelphia bankruptcy attorneys will likely advise you to file a Chapter 13 bankruptcy case. 

Chapter 7 Bankruptcy 

A Chapter 7 bankruptcy has no mechanism or means to cure a mortgage default. Therefore, while the automatic stay goes into effect and stops any pending foreclosure or sheriff sale, the bankruptcy itself does not address the mortgage arrears. If you filed Chapter 7 to stop a foreclosure, you are only buying time. 

If a delinquency exists, a mortgage lender will typically file a motion for relief from the automatic stay in a Chapter 7 case soon after the filing date. Because there is no means to cure the default in Chapter 7, the court will usually hold in favor of the lender. 

Chapter 13 Bankruptcy 

There is a significant difference between Chapter 7 and Chapter 13 bankruptcies. When a debtor files Chapter 13, they are required to submit a bankruptcy plan that proposes payments to their creditors. Often, a Chapter 13 is explicitly filed to pay back mortgage arrears when a homeowner is delinquent in their mortgage payments or facing foreclosure. 

How Can I Keep My House During Chapter 7 Bankruptcy if the Property is Underwater? 

First, if the mortgage balance is higher than the fair market value of your home, the property is said to be “underwater.” This means that you have no equity in your house. While this sounds bad from an investment perspective, it does make things much easier in bankruptcy. 

Assess Property in Bankruptcy Estate 

All property you own is considered part of the “bankruptcy estate” and is available to a trustee to liquidate to pay your creditors, including your house. Fortunately, federal and state exemptions allow you to keep possession of most, if not all, of your property. 

When you file Chapter 7, our Pennsylvania bankruptcy attorneys will review all your assets and the exemptions that protect them. If your house has no monetary value because the mortgage balance is more than the property is worth, no exemption is required. 

Calculate Exempt Equity 

If the value of your home exceeds the mortgage balance, things get more complicated. The federal homestead exemption for a residential property is $31,575 in 2026. This is the amount of equity you can protect in Chapter 7. For example, say your home is worth $120,000 and your current mortgage balance at the time of filing is $100,000, leaving you $20,000 worth of equity. In this scenario, the exemption protects your home, so you can likely file Chapter 7 without the risk of losing it. 

What if the value is more than $120,000? For instance, say your home is worth $150,000, and the remaining mortgage is $100,000. Now the equity in the house exceeds the exemption. In this situation, you would most likely be required to file Chapter 13. 

How Can Tenancy by the Entirety Help Me Keep My Home in Chapter 7? 

Pennsylvania has a specific exemption for homes owned by married couples. When you own a home jointly with your spouse, it will typically be deeded as “tenants in the entirety.” Under this exemption, the property is protected from any creditor if only one spouse owes the debt. That last part is very important when filing Chapter 7. 

Who Does Tenancy by the Entirety Apply To? 

Imagine an older married couple who have paid off their mortgage but still have significant credit card and medical debt. They are on a fixed income, cannot pay all of their monthly bills, and are considering filing Chapter 7. 

How Does Tenancy by the Entirety Work? 

Is their house safe? The answer depends on who owes what debt. Under these circumstances, the federal homestead exemption provides this couple no help. If they used the federal exemption, the trustee would sell their home to pay their creditors. 

However, the Pennsylvania tenancy by the entirety exemption could be beneficial. If none of the debt is shared, the house is protected from any collection actions by individual creditors. Unfortunately, if the couple had any joint liabilities or shared a credit card, this exemption would not apply to that debt. 

Federal vs. Pennsylvania Exemptions in Chapter 7 Bankruptcy 

Another drawback is that when you file for bankruptcy, you must choose between the federal and the Pennsylvania exemptions. You cannot mix and match them. Overall, the federal exemptions afford a debtor greater protection. However, if your house has substantial equity, the Pennsylvania exemptions might be more beneficial. 

When preparing to file Chapter 7 or Chapter 13, it is critical to have an accurate appraisal of your home’s value, an idea of your current mortgage balance, and a detailed accounting of all your debts. 

Our experienced Pennsylvania Chapter 7 bankruptcy attorneys will thoroughly review all your information to assist you in filing for the bankruptcy chapter that best suits your situation. 

What Happens if My Home is Overvalued in Bankruptcy? 

If you are filing for bankruptcy, especially Chapter 7 bankruptcy, an accurate home appraisal is crucial. If your home is overvalued, that could jeopardize your case. 

No Federal Homestead Exemption 

One of the biggest consequences of your home being overvalued in bankruptcy is missing out on the federal homestead exemption. This exemption lets you protect up to $31,575 of equity in your primary home from creditors. A higher appraisal increases your equity, and you might exceed the exemption’s limits. 

Chapter 7 Trustee Sale 

In Chapter 7 bankruptcy cases, the court often appoints an impartial trustee or panel of trustees to manage the case, review debts, and sell non-exempt assets. If your house is overvalued and, after factoring in your mortgage and the federal homestead exemption, there is too much non-exempt equity in the home, the trustee might sell the house to pay off debts. 

Higher Chapter 13 Payments 

Your house being overvalued also has consequences in a Chapter 13 bankruptcy case. The amount you have to pay creditors is based on the non-exempt equity in your home, and if that is inflated, so would your monthly payments under a Chapter 13 repayment plan. 

FAQs About Keeping Your Home Under Chapter 7 Bankruptcy in Pennsylvania 

Will I Automatically Lose My Home Under Chapter 7 Bankruptcy? 

You won’t automatically lose your home after filing Chapter 7 bankruptcy, and you will have time to work with our Pennsylvania bankruptcy lawyers to develop a plan and avoid collection efforts under the automatic stay. However, if you don’t plan to protect your home during bankruptcy, it could eventually be sold and liquidated to repay debts. 

Does Everyone Get an Automatic Stay When Filing Chapter 7 Bankruptcy? 

Automatic stays aren’t universal, and typically don’t apply to child support payments. Repeat filers may not get automatic stays, and if they do, those stays may only last 30 days, allowing creditors to resume collection efforts during the bankruptcy case. 

What Exemptions Can I Use to Keep My Home During Chapter 7 Bankruptcy in Pennsylvania? 

If you live in Pennsylvania, you can only use the federal homestead exemption to help protect your home under Chapter 7 bankruptcy. In 2026, the federal homestead exemption protects up to $31,575 in home equity. You can’t use federal and state exemptions; you can only pick one set or the other. 

Can I Double My Homestead Exemption to Keep My Home if I Am Married in Pennsylvania? 

Married couples may be able to double the federal homestead exemption to protect more of their home equity from creditors, up to $63,150 in 2026. To double the exemption, married couples must file for bankruptcy together. 

Do I Need a Lawyer to Keep My Home During Chapter 7 Bankruptcy? 

Keeping your home is not guaranteed during Chapter 7 bankruptcy if you have few assets and substantial secured debts, and you could have a much harder time keeping your house without our lawyers’ help protecting it. 

Can I Lose My Home Under Chapter 13 Bankruptcy? 

Losing your home is less of a concern during Chapter 13 bankruptcy. However, if you can’t keep up with current mortgage payments and the payments for your repayment plan, your home could be at risk once again. 

How Quickly Can Filing for Bankruptcy Help Me Keep My Home in Pennsylvania? 

Being proactive and filing for bankruptcy is an effective strategy to keep your home, especially if you are facing mortgage foreclosure or have other pressing debts you need to repay. Within 4 to 6 months of filing Chapter 7 or 3 to 5 years of filing Chapter 13, you could be debt-free, and your home no longer in jeopardy. 

Call Our Lawyers to Get the Help You Need with Your Pennsylvania Bankruptcy Case 

To arrange for a completely free and confidential case review with the Bucks County bankruptcy lawyers of Young, Marr, Mallis & Associates, call us at (215) 701-6519.