Chapter 7 vs. Chapter 13: What Happens to Your House

The single biggest factor in what happens to your home in bankruptcy is which chapter you file. Chapter 7 and Chapter 13 work very differently for homeowners. Here is the plain-English comparison, with a bankruptcy attorney for your specifics.

Chapter 7 vs 13 house California — liquidation vs repayment plan and what each means for keeping your home

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Chapter 7: Liquidation

Per the U.S. Courts, Chapter 7 is liquidation: a trustee gathers and sells your nonexempt assets to pay creditors. For your home, the question is equity. If your equity fits within California's homestead exemption — and you are current on the mortgage — you can usually keep the house. If your equity exceeds the exemption, the trustee may sell it, give you the exempt amount, and use the rest to pay creditors.

Chapter 13 keep home California — three to five year plan to catch up mortgage and keep the house

Chapter 13: Repayment Plan

Per the U.S. Courts, Chapter 13 is a three-to-five-year repayment plan for people with regular income. A major advantage is that it lets you keep your property and catch up past-due mortgage payments over time — a real lifeline if you fell behind. Your plan must pay creditors at least the value of your nonexempt equity, but you keep the home as long as you make the payments.

Which Path Points Toward Selling?

Sometimes keeping the home is not the goal — or not realistic. If your Chapter 7 equity is over the exemption, or a Chapter 13 plan payment is more than you can sustain, selling may be the smarter move. Selling during an open case requires court or trustee approval, and after discharge you are free to sell. Either way, an as-is cash sale is fast and certain. A bankruptcy attorney can tell you which chapter and which path fit your situation; this is general information, not legal or financial advice.