For homeowners in Port Richey struggling with overwhelming debt, the house is one of the biggest concerns when considering bankruptcy. Whether it’s a modest family home or a property you’ve spent years investing in, the thought of losing it can be deeply unsettling. The good news is that bankruptcy doesn’t automatically mean foreclosure. The outcome depends on the type of bankruptcy filed, your mortgage status, and the equity in your home.
Understanding how bankruptcy affects homeownership is essential to making informed decisions during a financially stressful time.
Different bankruptcy types, other impacts on your home
The effect on your home varies depending on whether you file under Chapter 7 or Chapter 13. Chapter 7 is often referred to as liquidation bankruptcy. It involves selling off certain non-exempt assets to pay creditors. If your home has significant equity and is not protected under Florida’s homestead exemption, your house could be at risk of being sold.
Chapter 13, on the other hand, is designed to help individuals repay debts over three to five years. If you’re behind on mortgage payments, Chapter 13 may allow you to catch up while keeping your home as long as you stay current on your payments under the court-approved plan.
The role of Florida’s homestead exemption
Florida offers a substantial homestead exemption that may protect your home in bankruptcy, depending on how long you’ve owned the property and whether it’s your primary residence. If the home qualifies, the exemption can shield an unlimited amount of equity, which means the trustee cannot force a sale to satisfy creditors in a Chapter 7 case.
However, there are time-based rules. For the full exemption to apply, you must have owned the home for at least 1,215 days (about three years and four months) before filing. Otherwise, a federal exemption limit may be used instead.
What happens if you’re behind on mortgage payments
If you’re current on your mortgage, you can keep your home under Chapter 7, even if you file for bankruptcy. But if you’re behind and your lender has started foreclosure proceedings, Chapter 7 may not stop the process permanently. It could delay the foreclosure temporarily due to the automatic stay, which halts collection efforts, but it may only buy you a few months.
Chapter 13 provides a better option in these cases. It allows you to make up missed payments over time while continuing to pay your current mortgage. This is often the preferred route for homeowners who want to avoid foreclosure.
Equity matters more than you think
One of the most overlooked aspects of bankruptcy and homeownership is equity—the difference between your home’s market value and the amount you owe on your mortgage. In Chapter 7, if your equity exceeds the exemption amount, the bankruptcy trustee may attempt to sell the home to access the non-exempt portion.
In Chapter 13, your equity impacts how much you’ll need to repay unsecured creditors through your payment plan. The more equity you have, the higher the amount you may be required to pay back over time, but your home is not typically at risk.
Automatic stay offers temporary protection
Regardless of which type of bankruptcy you file, an automatic stay goes into effect as soon as the paperwork is submitted to the court. This stay prevents creditors from foreclosing, collecting, or taking legal action for a period of time. While it’s not a permanent solution, it can give you the breathing room to sort out your financial situation.
Deciding with your home in mind
Filing for bankruptcy is a personal decision that affects every part of your life, including your home. Whether your goal is to stay in your house or make a clean break, understanding your options is the first step toward making the best decision for your circumstances.
For those in Port Richey weighing the impact of bankruptcy on their home, experienced legal guidance can offer clarity and help you move forward with confidence. The Weller Legal Group team can walk you through your options, explain how exemptions may apply to your home, and help you protect what matters most.
