The All-in-One Solution for California Homeowners
Whether you lose your house if you file bankruptcy in California depends on the chapter, your equity, and the state’s homestead exemption. Chapter 13 generally lets you keep the home if you stay current on the plan and mortgage. Chapter 7 can too, when your equity fits the exemption and payments continue. Filing triggers an automatic stay that temporarily halts foreclosure. If keeping the house isn’t realistic, a direct cash sale can close in as few as 7 days.
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Whether you keep your home comes down to the bankruptcy chapter, your equity, and California’s homestead exemption.
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Chapter 13 generally lets you keep the home if you stay current on a three-to-five-year repayment plan and on new mortgage payments.
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Chapter 7 may let you keep the home when your equity fits within California’s homestead exemption and you keep paying the mortgage.
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Filing triggers an automatic stay that temporarily halts foreclosure until the case ends or a lender wins relief from it.
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If you bought the home within 1,215 days of filing, the homestead equity you can protect is generally capped at $214,000 for cases filed on or after April 1, 2025.
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If keeping the home isn’t realistic, a sale at a fair price can preserve your equity, while a deep-discount sale shortly before filing can be reversed.
If you’re worried you would lose your house if you file bankruptcy in California, the short version is that bankruptcy doesn’t necessarily mean you will lose your home. Whether you can keep yours depends on factors like your mortgage payments, the equity in your home, and the type of bankruptcy you file. The automatic stay pauses most collection and foreclosure activity the day you file. That buys time. The debt stays, and a lender can ask the court to lift the stay.
A homeowner who is on the mortgage with modest equity is in a very different spot from one who is four payments behind with a lot of it. Every case rests on its own numbers, starting with your home’s value and what you owe on it, so a California bankruptcy attorney should run them before you file.
Chapter 13 lets you keep your home through a repayment plan, while Chapter 7 depends on whether your equity fits inside the homestead exemption. The table further down puts the two side by side.
Often called “liquidation bankruptcy,” Chapter 7 involves selling off assets to pay creditors. Your home is considered an asset, and the bankruptcy trustee might sell it to pay your creditors, but only when your equity runs past the exemption.
Even then, a trustee sells only when the unprotected equity would leave creditors with something after the mortgage and costs of sale. With little or no unprotected equity, there’s usually no reason to sell.
What Chapter 7 can’t do is fix a missed mortgage payment. Fall behind, and the lender can ask the court to lift the stay and pick the California foreclosure timeline back up where it left off.
Chapter 13, known as “reorganization bankruptcy,” allows you to catch up on missed payments through a structured repayment plan. Under a Chapter 13 plan, you make monthly payments to a trustee, who then distributes the funds to your creditors, including your mortgage lender.
The plan generally runs three years if your income is below the state median and up to five years if it’s above. The law lets you cure missed mortgage payments until the foreclosure sale itself, which is why the date on a California Notice of Default matters so much.
Even after filing for bankruptcy, staying current on your mortgage payments is crucial. Missing payments after filing could still lead to foreclosure, even under Chapter 13. The plan also has to pay unsecured creditors at least the value of your non-exempt equity, which matters most when your equity runs well past the exemption.
Income and other debts also decide which chapter you qualify for, and a wrong pick can put the house at risk. That decision belongs with a California bankruptcy attorney, who can review your situation, your debts, and your mortgage status.
California’s homestead exemption protects a range of home equity in bankruptcy, and where you land in that range depends on county home prices.
Under California’s homestead statute, the protected amount is the greater of your county’s median single-family sale price from the prior calendar year (capped at $600,000) or $300,000; both numbers are adjusted for inflation every January 1 since 2022.
California publishes no official chart of the indexed amounts, so any dollar figure needs checking against current data before you rely on it. For 2026, the Sacramento County Public Law Library lists the range as $370,550 to $731,300.
The exemption shields equity, which is your home’s value minus the mortgage and any other liens. The key is to determine how much equity you have in your home. If your home has little or no equity, it’s more likely you’ll be able to keep it. But if you have significant equity beyond the exemption, the bankruptcy trustee may require the sale of your home to pay off debts.
A house worth $700,000 with a $450,000 mortgage carries $250,000 in equity, below even the $300,000 statutory minimum before indexing.
Two federal rules limit how far the exemption goes. To use California’s exemptions at all, you must have lived in the state for the 730 days before you file. And if you acquired the home within 1,215 days of filing, protected homestead equity is generally capped at $214,000 for cases filed on or after April 1, 2025.
California also lets filers pick between two exemption systems. The alternative system carries a much smaller homestead amount, so homeowners with real equity usually rely on the exemption described above.
California’s homestead exemption offers some protection for your home’s equity, but there’s still no guaranteed outcome.
Here is how Chapter 7 and Chapter 13 bankruptcy treat your California home.
Chapter 13 is the chapter built to catch up on missed mortgage payments over three to five years, and Chapter 7 offers no way to do that.
Yes, but there are specific steps involved, and approval from the court is typically required.
In Chapter 7 bankruptcy, the bankruptcy trustee controls your assets, and your home is considered an asset. If you want to sell your house during Chapter 7 bankruptcy, the sale must be approved by the court. You’ll also need to provide the trustee with details of the sale, including the buyer, sale price, and how the funds will be distributed.
In Chapter 13 bankruptcy, selling a home is possible, but the sale must be part of your repayment plan. Any proceeds from the sale may need to be used to pay off creditors as part of your structured plan. Court approval is usually required, and the process can take longer than a typical home sale.
Selling before you file skips that oversight, but the law looks back two years. A transfer can be unwound if you received less than reasonably equivalent value for it, so a sale far below the house’s value invites a challenge. A cash offer trades some price for speed, so compare any offer with what the house would bring on the open market.
Once your bankruptcy is discharged, you’re generally free to sell your home without court approval. However, it’s important to review any remaining obligations or liens that may still affect the property.
Osborne Homes is a California real estate investment company that has bought houses directly for cash, as-is, since 2007. We work as a direct buyer, not an agent, and sellers have no need for repairs, cleaning, or staging.
Not automatically. A homeowner who is on the mortgage and whose equity fits the exemption can often keep the house in Chapter 7, and Chapter 13 exists for people who have fallen behind. A Chapter 7 trustee only has a reason to sell when equity runs past the exemption.
California’s homestead exemption allows you to protect a certain amount of equity in your primary residence from creditors during bankruptcy. Under California’s homestead statute, it is the greater of your county’s prior-year median single-family sale price (capped at $600,000) or $300,000, with both figures indexed for inflation each January 1 since 2022. It protects equity, meaning value minus mortgages and liens.
Filing stops a foreclosure temporarily. The automatic stay freezes the sale as soon as the petition is filed, but a lender can ask the court to lift it, and Chapter 7 does nothing to fix missed payments. Chapter 13 gives homeowners the chance to prevent foreclosure by catching up on payments while keeping their home, as long as the cure happens before the foreclosure sale.
For homeowners trying to retain their property, Chapter 13 is typically more favorable, especially if you’re behind on mortgage payments. It’s the chapter that lets you catch up over three to five years. Chapter 7 can work when you’re current and your equity is protected, and it moves faster. Eligibility also depends on your income and other debts.
Yes, with court oversight. In Chapter 7 the trustee and court control a sale because the house belongs to the bankruptcy estate, and in Chapter 13 a sale needs court approval with proceeds handled through your plan. Selling before you file skips that process, though a sale for far less than the home is worth can be challenged afterward.
Before you file, put a number on your equity and set it against your county’s exemption. If keeping the house isn’t realistic and a firm closing date matters more than top price, Osborne Homes makes no-obligation cash offers and can close in as few as 7 days.
If a sale date is already set, see how to sell a house in foreclosure. And if you’re ready to sell, fill out the short form and get your cash offer today.
This page is general information about California and federal bankruptcy law, not legal advice, and laws and dollar amounts change.
The Osborne Homes Team
The Osborne Homes team specializes in California real estate, helping buyers, sellers, and homeowners navigate the market with clarity and confidence. Our articles are written to provide practical guidance, local insight, and up-to-date information you can trust.
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