What Happens to Your Home During Bankruptcy in Pennsylvania?

One of the biggest fears people have about filing for bankruptcy is losing their home. The good news is that bankruptcy does not automatically mean you will be forced out of your house. The outcome depends on which chapter you file under, how much equity you have, and whether you can keep up with your mortgage payments going forward. Let the banking attorneys at Mette Law advise you on your best options.

Tenancy by the Entirety

If you and your spouse own the home jointly as tenants by the entirety and only one of you files for bankruptcy, the property may receive additional protection. Pennsylvania recognizes this form of ownership, and creditors to whom only one spouse owes money generally cannot reach property held in both names under this designation.

Automatic Stay

The moment your bankruptcy petition is filed with the court, an automatic stay takes effect, immediately halting any pending foreclosure proceedings against your home. That breathing room gives you time to address overdue payments, explore your options under Chapter 13, or work with your lender on alternative arrangements without the threat of losing your property overnight.

No State Exemption

Pennsylvania does not offer a state-level homestead exemption for bankruptcy filers. Residents must rely on the federal bankruptcy exemptions, which currently allow you to protect a limited amount of equity in your primary residence. If your home equity exceeds the federal limit, the unprotected portion could be at risk depending on the type of bankruptcy you file.

Chapter 7 Bankruptcy (Liquidation)

Chapter 7 eliminates most unsecured debts, but it requires a review of your assets to determine which can be sold to repay creditors. When it comes to your home, several factors determine whether you keep it or not:

• Protection: If the equity in your home is within the allowable federal exemption limits, the bankruptcy trustee generally cannot require its sale, allowing you to keep the property.
• Risk: If your equity exceeds the exemption limit, the trustee has the authority to sell the home and use the proceeds to pay creditors, returning only the exempt portion to you.
• Ongoing payments: Filing Chapter 7 does not eliminate your mortgage obligation, so you must remain current on your monthly payments and continue making them on time to keep the home.

Chapter 13 Bankruptcy (Reorganization)

Chapter 13 is often the better option for homeowners because it allows you to catch up on missed mortgage payments through a structured repayment plan lasting three to five years. Here is how it works for your property:

• Protection: Your home is generally safe from liquidation under Chapter 13, and you can cure mortgage arrears gradually through your court-approved plan.
• Requirement: You must have a regular income sufficient to fund the repayment plan, and you need to keep making ongoing mortgage payments in addition to your plan payments throughout the duration.

Contact a Harrisburg Bankruptcy Lawyer Now

Your home is worth fighting for, and the right legal guidance can make all the difference in whether you keep it. Call Mette Law today at 717-232-5000 or contact us online to schedule a consultation with a Harrisburg bankruptcy lawyer who will review your situation, explain all available options, and help you take the steps needed to protect your most valuable asset.