Whether you need to keep making payments on your home in the lead-up to bankruptcy and during your bankruptcy case depends in large part on whether you want to keep your home. Bankruptcy offers multiple options for managing your mortgage debt, but none of those options allows you to keep the house without paying for it.
Here’s what you need to know about how mortgage debt is handled in bankruptcy and how to choose the best option for you.
The Automatic Stay
One of the most important aspects of the bankruptcy process is the automatic stay. It kicks in the moment you file for bankruptcy and it temporarily stops all collection actions against you. Collection lawsuits will stop dead, the bank can’t repossess your car (and may have to return it if it’s already been repossessed), creditors can’t place liens on your home, and no one can garnish your wages or levy your bank accounts.
As far as your mortgage is concerned, the automatic stay will prevent foreclosure in the short term. Even if the auction is already scheduled, you can stop the sale by filing for bankruptcy. But that protection doesn’t last. The automatic stay terminates when your bankruptcy case wraps up, and in some cases sooner.
When a bankruptcy filer is behind on their mortgage, it is common for the lender to file a Motion for Relief from Stay. That’s a way of asking the court to say the automatic stay doesn’t apply to them and they are free to pursue foreclosure. These motions are usually granted if the homeowner doesn’t have a viable plan for resolving the mortgage delinquency in bankruptcy.
Keeping Your Home
When you file for bankruptcy, you’ll need to decide whether you want to keep your home or not. If not, you can stop making mortgage payments. The bank will typically request relief from the automatic stay and move on to sell your home.
In California, a homeowner typically isn’t responsible for any remaining balance after a foreclosure sale (known as a “deficiency”). There is an exception, though. If the lender goes through a judicial foreclosure process, they can get a judgment against you for the remaining balance. However, if your debts are discharged in bankruptcy, that discharge typically includes any remaining balance on a mortgage loan, even if the lender used the judicial process.
If you do want to keep your home, you will want to talk to your Los Angeles bankruptcy lawyer about which type of bankruptcy will better help you manage your mortgage debt. Chapter 7 bankruptcy and Chapter 13 bankruptcy are very different processes and tailored to accomplish different goals.
Chapter 7 Bankruptcy and Mortgages
In a Chapter 7 bankruptcy case, you’ll surrender any non-exempt assets and the bankruptcy trustee will sell them. The proceeds will go to your creditors. Fortunately, the vast majority of people who file for Chapter 7 bankruptcy have no non-exempt assets and don’t have to give up any property.
California offers two different sets of exemptions to protect your assets and you can choose the set that best protects the property you want to keep. One of those sets includes very generous protection for your home. The exact amount of the exemption depends on where in California your home is located, and is periodically updated. In 2026, the minimum exemption is $371,547 and the cap is $743,459. Residents of Los Angeles, where housing costs are high, typically receive the maximum exemption.
If your home equity is covered by the exemptions, you’ll be able to keep it as long as you continue to make payments. If your home equity is not covered by the exemption, you usually won’t be able to keep it in a Chapter 7 case.
At the end of the process, most types of unsecured debts will be discharged.
Chapter 13 Bankruptcy and Mortgages
Under Chapter 13, you’ll work with your attorney and the bankruptcy trustee to create a payment plan that will last 3 to 5 years. If you successfully complete the plan, many remaining unsecured debts will be discharged.
The big benefit of a Chapter 13 plan for a homeowner who has fallen behind is that past-due mortgage balances can be rolled into the plan. This is most useful for someone who can afford to make current mortgage payments on time, but can’t catch up the past-due balance quickly enough to satisfy the lender. Once that past-due balance is part of a confirmed Chapter 13 plan, the mortgage holder can’t pursue quicker payment–as long as you do your part. You’ll have to make your bankruptcy plan payments on time, make current mortgage payments as they come due, and comply with any other orders from the bankruptcy court.
The bottom line: Whether you file under Chapter 7 or Chapter 13, you’ll have to continue making mortgage payments if you want to keep your home.
Other Mortgages and Home Equity Lines of Credit
The situation is somewhat different if you have taken out other loans against your home. Generally, you won’t be able to discharge second mortgages or home equity loans in Chapter 7 if you want to keep your home. You may be able to discharge a second mortgage or home equity line of credit in Chapter 13 if your home is underwater – if you owe more on the first mortgage than the house is worth, leaving no security for the secondary loan.
What should you do?
If you’re struggling with mortgage debt, you should think carefully about whether you want to keep your home. Most people’s automatic response is “yes,” but it isn’t always the best answer. In some cases, surrendering your home in bankruptcy and walking away from a very large debt can be the best step toward a fresh financial start–especially if you owe more than your home is worth.
If you want to keep your home, you’ll need to determine whether you’ll be able to keep making mortgage payments after bankruptcy. (Remember, bankruptcy can wipe out some of your other debts, so you’ll have more cash to make mortgage payments.) If you have arrearages, Chapter 13 mortgage payments can help you repay them.
The best way to determine how you may be able to protect your home is to fully educate yourself about the options. Contact us online or come in for a free consultation with one of our experienced bankruptcy attorneys. We’ll go over your finances with you and help you determine the best way to deal with your debt.