Bankruptcy & Real Estate FAQ: Questions New York Homeowners Ask
Hudson River Realtors | Referral Network Serving New York State
Can I keep my home if I file bankruptcy?
Often yes. In Chapter 13, you can keep your home while catching up on arrears. In Chapter 7, you can keep your home if your equity is within New York's homestead exemption and you stay current on mortgage payments.
What is the homestead exemption in New York?
New York's homestead exemption protects a specific amount of home equity from creditors in bankruptcy. In Dutchess, Putnam, and Orange counties, the amount is $179,950 per person as of 2026. Married couples filing jointly can potentially double this amount.
Can bankruptcy stop a foreclosure?
Yes. Filing a bankruptcy petition triggers an automatic stay that immediately halts foreclosure proceedings. Chapter 13 is particularly effective because it allows you to cure mortgage arrears over a three-to-five-year repayment plan.
What is the difference between Chapter 7 and Chapter 13?
Chapter 7 liquidates non-exempt assets to pay creditors and discharges remaining debts. Chapter 13 allows you to keep all property while repaying debts over 3-5 years. For homeowners, Chapter 13 is often preferable because it protects the home and allows you to cure arrears.
Can I sell my home during bankruptcy?
Yes, with court approval. In Chapter 7, the trustee may sell the home. In Chapter 13, you file a motion to sell. In both cases, proceeds are distributed according to bankruptcy law and your plan obligations.
What is lien stripping?
Lien stripping is available in Chapter 13 when your home is worth less than your first mortgage balance. Junior liens (second mortgages, HELOCs) that are wholly unsecured can be stripped and treated as unsecured debt, potentially saving you thousands.
How long does bankruptcy stay on my credit?
Chapter 7 remains on your credit report for 10 years, Chapter 13 for 7 years. However, many people see credit improvement much sooner as the discharge eliminates the ongoing impact of unpaid debts.
Can I get a mortgage after bankruptcy?
Yes. FHA loans may be available as soon as 2 years after a Chapter 13 discharge or 3 years after Chapter 7. Conventional loans typically require a 4-year waiting period after Chapter 7 or 2 years after Chapter 13.
What happens to my second mortgage in bankruptcy?
If your home value is less than what you owe on your first mortgage, a second mortgage may be stripped in Chapter 13. Otherwise, second mortgages are treated as secured debt and must be paid or the property surrendered.
Do I need a bankruptcy attorney?
While not legally required, bankruptcy is complex and mistakes can be costly. An experienced bankruptcy attorney can help you choose the right chapter, maximize exemptions, and navigate the court process. The Hudson River Realtors network can help with the real estate side.