Can I Keep My House if I File Bankruptcy in New York?

How Bankruptcy and Home Ownership Work Together

One of the most persistent myths about bankruptcy is that you will lose your home if you file. For the vast majority of New York homeowners, this is simply not true. In fact, for homeowners who are behind on their mortgage, Chapter 13 bankruptcy is specifically designed to let you catch up on arrears and keep your home.

Whether you keep your home in bankruptcy depends on three factors:

• How much equity you have in the home
• Whether you are current on mortgage payments (or can get current)
• Which chapter of bankruptcy you file

New York's Homestead Exemption — What It Protects

New York law protects a significant amount of home equity in bankruptcy. Since 2012, New York residents can choose between New York State exemptions or Federal bankruptcy exemptions — whichever set protects more of your assets.

New York State Homestead Exemption

For residents of New York City (Staten Island, Brooklyn, Queens, Manhattan, Bronx), Nassau, Suffolk, Westchester, Rockland, Putnam, Orange, and Dutchess counties: up to $204,825 in home equity is fully protected.

For Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties: up to $170,700 is protected.

For all remaining upstate counties (Sullivan, Greene, and others): up to $102,400 is protected.

Figures per CPLR § 5206, last updated April 2024. Next scheduled adjustment: April 2027.

Federal Homestead Exemption (Alternative)

The federal exemption protects up to $31,575 in home equity — significantly less than New York's exemption for most homeowners. This is why most New Yorkers choose the state exemptions. We calculate both and apply whichever is better for your specific situation.

What Is "Equity" for Bankruptcy Purposes?

Your equity is the current market value of your home minus any liens against it — your mortgage balance(s), home equity loans, and any recorded judgments. For example:

• Home value: $450,000
• Mortgage balance: $310,000
• Equity: $140,000 — fully protected under NY's $204,825 exemption

Chapter 7: Keeping Your Home When You Are Current on Payments

In Chapter 7 bankruptcy, if your home equity is within the exemption and you are current on your mortgage, the process is straightforward:

1. The exemption protects your equity — the bankruptcy trustee cannot force a sale
2. The mortgage lien survives bankruptcy — your personal liability may be discharged, but the bank's lien on the property remains
3. Continue making payments — keep paying your mortgage and you keep your home
4. Consider reaffirmation carefully — reaffirming your mortgage is usually not necessary and can be risky. We advise you individually on this decision.

Chapter 13: Keeping Your Home When You Are Behind on Payments

If you are behind on your mortgage, Chapter 7 will not save your home from foreclosure — but Chapter 13 bankruptcy can. Chapter 13 allows you to:

• Stop foreclosure immediately via the automatic stay
• Catch up on mortgage arrears over 3–5 years through the repayment plan — spreading what you owe into affordable monthly payments
• Strip off a second mortgage if the home value is less than the first mortgage balance (lien stripping)
• Keep the home as long as you maintain plan payments and keep up with ongoing mortgage obligations

What Happens if My Equity Exceeds the Exemption?

If your equity significantly exceeds the homestead exemption, a Chapter 7 trustee could force a sale of the property, pay you the exempt amount, and use the remainder to pay creditors. However, in practice this scenario is rare — and we will know before you ever file whether this is a risk.

If your equity does exceed the exemption, Chapter 13 is almost always the better choice. Chapter 13 allows you to keep all your assets — regardless of equity — in exchange for repaying creditors through a 3–5 year plan. No home sale required.

Other Assets Protected in New York Bankruptcy

Beyond your home, New York law protects significant additional assets in bankruptcy:

• Retirement accounts: 401(k), IRA, pension — fully protected up to $1,711,975
• Vehicle: Up to $4,825 in equity
• Federal wildcard: Up to $1,675 + unused homestead — protects cash, tax refunds, and other property
• Social Security and disability income
• Household goods, clothing, and tools of the trade

Frequently Asked Questions