How bankruptcy affects your mortgage: A guide

When you’re considering bankruptcy, your mortgage is often one of the biggest concerns. Bankruptcy may offer certain protections for homeowners, but it also comes with rules that can affect your mortgage in the short and long term.

This guide walks you through the key factors that influence whether you can keep your house and what your options are after bankruptcy. You’ll also learn how long you may need to wait before applying for a new mortgage and what steps you can take to help you rebuild.

Can I keep my house if I file for bankruptcy?

One of the first questions homeowners ask is, “Can I file bankruptcy and keep my house?” The answer depends on the type of bankruptcy you file and how much equity you have in your home. 

A lien is a legal claim a lender has on a property until the debt is repaid. Your home serves as the collateral for your mortgage, making it a type of secured debt. That means your lender has the right to foreclose if you stop making your mortgage payments. Other debts, like credit cards or medical bills, are unsecured debt because they aren’t tied to any type of asset.

These distinctions matter in bankruptcy. Since your mortgage is secured, bankruptcy doesn’t automatically eliminate the lender’s claim against your home.

However, many times you can keep their house if the property is considered exempt and you stay current on mortgage payments. In some cases, bankruptcy may even give you time to catch up on missed payments or temporarily pause foreclosure.

The type of bankruptcy determines what happens to your house

Bankruptcy is a legal process designed to help people reorganize or eliminate certain debts. Homeowners may file because of unexpected financial challenges that make it difficult to stay current on payments. Below, we’ll walk through what happens after you file for bankruptcy and how it affects your mortgage.

Automatic stays on liens

Once you officially file for bankruptcy, an automatic stay goes into effect, which is a federal court order that temporarily stops most collection actions, including foreclosure. The automatic stay gives homeowners some breathing room by pausing creditor activity while the bankruptcy case is processed.

An automatic stay doesn’t mean you’re required to leave your home, and it doesn’t accelerate your mortgage. Your loan terms generally remain the same while the stay is in place. Here are some of the creditor actions that usually pause during an automatic stay:

• Foreclosure proceedings
• Collection calls and letters
• Wage garnishments
• Repossession efforts
• New lawsuits related to unpaid debts

You can imagine the sequence like this:

Filing → Automatic stay → Creditor pause → Bankruptcy review and next steps

Because the details of your case can vary, it’s important to speak with a bankruptcy attorney before filing. They can help you understand how the process may affect your mortgage and whether additional protections apply.

Next, let’s look at how the two most common types of bankruptcy treat mortgage debt differently.

Chapter 7 bankruptcy

Chapter 7 bankruptcy is designed to eliminate certain unsecured debts and give you a financial reset. A court-appointed trustee reviews your assets, and some nonexempt property may be sold to repay creditors. To keep your home during Chapter 7, you generally need to meet both of these conditions:

• Your home must be considered exempt property under federal or state exemption rules.
• You must be able to stay current on your mortgage payments or quickly catch up on any missed payments.

Even if your personal liability for the mortgage is discharged, the mortgage lien often remains on the property. That means the lender still has the right to foreclose if payments fall behind.

How does Chapter 7 bankruptcy affect my existing mortgage?

When you file Chapter 7, your existing property will be deemed fully exempt, partially exempt, or have zero exemption. Exemption is the amount of money you’re entitled to that the trustee cannot liquidate. If your property is declared fully exempt, the trustee cannot liquidate or sell it during the bankruptcy process. If it's partially exempt, depending on the amount of total exemption and equity in the home, the trustee may decide it’s beneficial to sell the property. And finally, if there is no property exemption, and equity in the home, the trustee can sell the property.    

Chapter 13 bankruptcy

Chapter 13 bankruptcy is designed for people who have a steady income but need more time to catch up on overdue debts. You’ll work with the court to create a repayment plan that lasts 3 – 5 years.

For homeowners, one of the biggest benefits of Chapter 13 is the ability to include past-due mortgage payments – also called arrears – in the repayment plan. This allows you to gradually catch up on missed payments while keeping your home, as long as you stay current on all new payments that come due after filing.

Here’s how the process generally works:

• You file for Chapter 13, and an automatic stay pauses foreclosure and most collection actions.
• You propose a repayment plan that outlines how you’ll pay back overdue debts, including any missed mortgage payments.
• Once the plan is approved, you make monthly payments to a bankruptcy trustee, who distributes the funds to your creditors.
• At the same time, you must continue making all regular mortgage payments that come due after filing. These payments are separate from the repayment plan.

After the repayment period is complete, any remaining eligible debts may be discharged. Your mortgage lien stays attached to the property, but if you’ve made all required payments, you should be current on your loan and able to continue making your regular monthly payments going forward.

What happens with my existing mortgage after Chapter 13?

With a Chapter 13 bankruptcy, you may not lose your property. When you submit your bankruptcy repayment plan, it should include the details of how you plan to repay your mortgage.

In most cases, an automatic stay is issued once Chapter 13 is filed, and creditors must stop collection efforts. There’s an important caveat to be aware of here: You must stay current on any mortgage payments that are due after the filing.

Can you get a mortgage while in bankruptcy?

The short answer to this question is usually no. Many lenders and mortgage investors require that the bankruptcy be either discharged or dismissed before application. Many loan types require a waiting period before you can even apply.

However, you may still be able to qualify for a mortgage while going through a Chapter 13 bankruptcy with Federal Housing Administration (FHA) or Department of Veterans Affairs (VA) loans, provided you’ve maintained a record of 12 consecutive months of on-time payments and receive approval from the court. Since we want to make sure you’re ready before applying for a new home loan, Rocket Mortgage doesn’t do new financing while you’re going through the bankruptcy process.

How long do I need to wait after bankruptcy to get a mortgage?

The amount of time you need to wait after bankruptcy before applying for a mortgage depends on the type of bankruptcy you filed and the loan program you’re applying for. For instance, Chapter 7 bankruptcy requires a longer waiting period because the debts are fully discharged. Chapter 13 often allows for a shorter wait since you repay some of your debts through a court-approved plan.

Because every situation is different, it’s important to work with your bankruptcy attorney and financial advisors before applying for a mortgage. They can help you understand your timeline, review your credit, and determine when you may be ready to qualify for a new home loan.

Steps to get a mortgage after bankruptcy

While every borrower’s situation is different, most people follow a similar set of actions to become eligible for a mortgage after bankruptcy. Here are the steps to take as you prepare:

• Review your credit report: Make sure all bankruptcy-related debts are reported accurately and dispute any errors.
• Rebuild your credit score: Focus on making on-time payments, keeping balances low, and using credit responsibly.
• Re-establish steady income: Lenders will want to see reliable employment and enough income to cover your future mortgage payment.
• Lower your debt-to-income (DTI) ratio: Paying down existing debts can make you a stronger candidate for a mortgage.
• Save for a down payment: The more you can save, the more options you’ll have once you’re ready to apply.
• Keep a record: Keep copies of income statements, bank records, and your bankruptcy discharge or dismissal paperwork.

How to get help with your mortgage after bankruptcy

If you’re navigating your mortgage after bankruptcy, you still have options. Many lenders offer programs designed to help homeowners stay on track, especially if you’ve recently completed your bankruptcy repayment plan or discharge.

Depending on your situation, you may be able to explore:

• Loan modification: Adjusting the loan term, interest rate, or monthly payment to make the mortgage more affordable.
• Forbearance: Temporarily pausing or reducing payments during a short-term hardship.
• Refinancing: Replacing your current loan with a new one once you meet waiting-period requirements and lender guidelines.
• Housing counseling: Working with a HUD-approved counselor who can help you review your budget, understand your options, and prepare for conversations with your lender.

If you’re reaching out to your servicer for help, be prepared to provide documentation about your bankruptcy, including:

• Your bankruptcy discharge or dismissal paperwork
• Proof of income and employment
• Recent bank statements or financial records
• A copy of your repayment plan, if you filed Chapter 13

Speaking with your lender or a trusted housing professional can help you understand which options you may qualify for and what steps to take next.

FAQ about mortgages and bankruptcy

Below are answers to some of the most common questions homeowners have about how bankruptcy affects mortgages and future homeownership.

Are mortgages forgiven in bankruptcies?

A mortgage itself is not forgiven in bankruptcy. While your personal liability for the loan may be discharged, the lien remains on the property, which means the lender still has the right to foreclose if payments aren’t made.

Can you get a mortgage after bankruptcy?

Yes, it’s possible to get a mortgage after bankruptcy. You can refinance or buy a house after bankruptcy if you meet the other qualifications. Depending on the bankruptcy type, you may not even have a waiting period with some nonconforming loans.

How does bankruptcy affect your credit score?

Bankruptcy typically lowers your credit score and can remain on your credit report for up to 10 years, depending on the chapter you file. The impact lessens over time as you rebuild your credit. 

What types of loans can I apply for after bankruptcy?

Most borrowers can apply for FHA, VA, or conventional loans once they meet the required waiting periods and lender guidelines. Some loan types, including government-backed options, may allow shorter waiting periods than jumbo or conventional loans.

How long after bankruptcy can you qualify for an FHA loan?

For Chapter 7 bankruptcy, the FHA usually requires a waiting period of at least 2 years after discharge or dismissal. With Chapter 13, you generally must complete your repayment plan and have the bankruptcy discharged or dismissed before applying.

Why is my loan reflecting active bankruptcy and my credit being impacted if I didn’t include my home in my bankruptcy?

The home is an asset and therefore required to be listed within the bankruptcy case. As a creditor, your mortgage lender is required to monitor the bankruptcy case. Depending on the chapter of the bankruptcy, it can affect the way they are required to report to the credit bureaus.

The bottom line: Recovery is possible after bankruptcy

Bankruptcy can change how your mortgage is handled, but it doesn’t close the door on homeownership. Understanding how Chapter 7 and Chapter 13 work and knowing what to expect during the waiting period can help you move forward with confidence.

If you’re a Rocket Mortgage customer and think you may need to file for bankruptcy, reach out to us as soon as possible. Our team can help you understand your options and provide guidance as you navigate the process.

Rocket Mortgage is a trademark of Rocket Mortgage, LLC or its affiliates.

Refinancing may increase finance charges over the life of the loan.