Does Chapter 7 or Chapter 13 Bankruptcy Save Your Home From Foreclosure?

 Posted on June 04, 2026 in Bankruptcy

Both Chapter 7 and Chapter 13 bankruptcy can slow down or stop a foreclosure, but they work very differently and offer very different outcomes for your home. Chapter 13 is generally the stronger option if keeping your home is your main goal. Chapter 7 can buy you time, but it does not fix the underlying mortgage problem. If you are behind on your mortgage and worried about losing your home in 2026, a Naperville, IL bankruptcy lawyer can help you figure out which path makes the most sense for your situation before it is too late.

How Does Bankruptcy Stop a Foreclosure?

The moment you file for bankruptcy, something called the automatic stay goes into effect. Under 11 U.S.C. Section 362, the automatic stay is a court order that immediately stops most collection actions against you, including foreclosure proceedings. Your lender cannot move forward with a foreclosure sale while the stay is active.

This gives you breathing room, but it is not a permanent fix on its own. What happens next depends on which chapter you filed and how you use that time.

What Does Chapter 7 Bankruptcy Do for Your Home?

Chapter 7 bankruptcy is designed to wipe out unsecured debt like credit cards and medical bills. It is a faster process, usually taking three to six months to complete. The automatic stay stops your foreclosure temporarily, but Chapter 7 does not give you a way to catch up on missed mortgage payments.

Once your Chapter 7 case closes, the stay lifts and your lender can resume the foreclosure process. If you are behind on your mortgage and have no way to catch up, Chapter 7 will delay the foreclosure but likely will not save your home long term.

Chapter 7 can still be useful in a foreclosure situation in certain ways. Eliminating other debt may free up enough money each month to make your mortgage payments going forward. But if you are already too far behind, that may not be enough.

What Does Chapter 13 Bankruptcy Do for Your Home?

Chapter 13 is often the stronger option for homeowners trying to save a home from foreclosure. It is sometimes called a wage earner's plan because it requires you to have regular income. Instead of wiping out debt immediately, Chapter 13 lets you reorganize what you owe and pay it back over three to five years through a court-approved repayment plan.

Under 11 U.S.C. Section 1322, a Chapter 13 repayment plan can include your mortgage arrears, which is the amount you are behind on your payments. You spread those missed payments out over the life of your plan and pay them back little by little while also keeping up with your regular monthly mortgage payment going forward.

If you complete the plan, you come out of bankruptcy current on your mortgage and keep your home. That is something Chapter 7 simply cannot do.

What Happens if You Miss a Payment During Chapter 13?

Staying current on your Chapter 13 plan payments is essential. If you fall behind on plan payments, the court can dismiss your case, which ends the automatic stay and allows your lender to move forward with foreclosure. Life happens, and if you run into trouble during your plan, your attorney may be able to request a modification. But staying on top of payments from the start is critical.

Are There Situations Where Chapter 7 Makes More Sense Than Chapter 13?

If you have already decided you cannot afford to keep your home and want to walk away, Chapter 7 may make more sense. It can give you several months to live in the home while the foreclosure process plays out, and it eliminates other debt so you can start fresh after you leave.

Some homeowners also use Chapter 7 to eliminate the personal liability on the mortgage. Under Illinois law, if your home sells for less than what you owe after foreclosure, the lender may be able to come after you for the difference. This is called a deficiency judgment. Chapter 7 can eliminate that personal liability, which protects you financially even if you lose the home.

What Is the Illinois Homestead Exemption?

Illinois law gives homeowners some protection through the homestead exemption. Under 735 ILCS 5/12-901, Illinois allows you to protect up to $50,000 in home equity, or $100,000 for a married couple, from creditors in a bankruptcy case. This exemption does not stop a foreclosure by your mortgage lender, but it does protect that amount of equity from being used to pay off other creditors in a Chapter 7 case.

Schedule a Free Consultation With Our Lisle, IL Bankruptcy Attorney

Attorney McCormick takes a straightforward, guy-next-door approach to every case, breaking things down in plain language so you actually understand your options and what to expect. When you work with The McCormick Law Firm, LLC, you work directly with him, not a paralegal or a case manager. He also offers discounts for military members, veterans, and first responders, because people who serve their community deserve access to quality legal help.

Contact our Naperville, IL bankruptcy lawyer by calling 630-517-8570 to schedule your free consultation today.