Many people who file for bankruptcy are able to keep their house and car. Whether you can keep them generally depends on two things: whether your equity is protected by exemptions, and whether you can keep making (or catch up on) the loan payments. The rules on exemptions differ in Maryland, D.C., and Texas, so where you live matters.

Will I lose my house if I file for bankruptcy?

In many cases, no. You can often keep your home in bankruptcy if your equity (the home’s value minus what you owe on it) is covered by a homestead exemption and you stay current on the mortgage, or, in Chapter 13, catch up on missed payments through a repayment plan.

The risk arises mainly in two situations. First, in Chapter 7, a trustee may sell a home if there is significant equity above the exemption, enough to pay creditors after costs of sale. Second, in either chapter, the lender can generally still foreclose if you fall behind and do not cure the default, because filing bankruptcy does not erase the mortgage lien.

What is a bankruptcy exemption?

An exemption is a legal protection that lets you keep certain property, up to a set dollar value, out of the reach of the bankruptcy trustee and your creditors. Common exemptions cover equity in a home, a vehicle, household goods, retirement accounts, and tools of your trade.

Each state has its own exemption list. Some states, like Maryland, require residents to use the state list. Others, including D.C. and Texas, let debtors choose either the local list or the federal list in the Bankruptcy Code, but not a mix of both.

Can I keep my car if I file for bankruptcy?

Often, yes. If the car is paid off, you can generally keep it when its value is within your available exemptions. If you have a car loan, you usually keep the car by staying current and choosing one of the options the law provides for secured debts.

• Reaffirmation: You sign a new agreement to remain personally liable on the loan after bankruptcy, and keep making payments. The agreement is filed with the court and can be cancelled within a limited window.

• Redemption: In Chapter 7, you pay the lender the car’s current value in one lump sum, which can be less than the loan balance.

• Surrender: You give the car back and the remaining balance is generally discharged.

In Chapter 13, you can often pay the car loan through your plan, and in some circumstances reduce the amount owed to the vehicle’s value. You are generally required to state your intention for secured property early in a Chapter 7 case, so it is worth deciding in advance.

What happens if I’m behind on my mortgage or car payments?

Chapter 13 is often the better fit if you are behind. It can let you pay the past-due amount (the arrears) over the life of a three-to-five-year plan while you keep up with regular payments. For a home, federal law allows a default on a principal residence to be cured until the home is sold at a lawful foreclosure sale.

Chapter 7 does not provide a way to catch up over time. If you are behind and file Chapter 7, the lender may ask the court for permission to proceed with foreclosure or repossession. For more, see: How Bankruptcy Can Stop Foreclosure, Garnishment, and Creditor Lawsuits

What are the federal bankruptcy exemptions?

The federal exemptions are a list in the Bankruptcy Code (11 U.S.C. § 522(d)) that debtors in some states, including D.C. and Texas, may choose instead of local exemptions. The amounts adjust every three years; the current figures took effect April 1, 2025.

The federal wildcard can be useful for renters or people with little home equity, because unused homestead exemption can be applied to a car, savings, or other property.

How do home and car exemptions work in Maryland, D.C., and Texas?

Maryland

Maryland is an “opt-out” state: in bankruptcy, Maryland debtors must use Maryland’s exemptions, not the federal list. Maryland’s bankruptcy homestead exemption for owner-occupied residential property is tied by statute to the federal homestead amount (Md. Code, Cts. & Jud. Proc. § 11-504(f)), which is currently $31,575.

Maryland has no separate motor vehicle exemption. Instead, a car is typically protected using Maryland’s $6,000 “wildcard” for cash or any property, plus an additional $5,000 personal property exemption available only in bankruptcy. Some married couples in Maryland may also have protection for property owned jointly as tenants by the entirety when only one spouse owes the debt.

Washington, D.C.

D.C. debtors can generally choose either the D.C. exemptions or the federal list. D.C.’s residence exemption (D.C. Code § 15-501(a)(14)) protects the debtor’s interest in real property used as a residence, and the statute does not state a dollar cap, which can make it significantly more protective than the federal homestead amount. D.C. also exempts up to $2,575 in one motor vehicle, plus a wildcard.

Texas

Texas debtors can generally choose the Texas or federal exemptions. The Texas homestead exemption has no dollar limit on value; it is limited by size instead: up to 10 acres for an urban home, and up to 200 acres for a family or 100 acres for a single adult for a rural home. Texas protects one vehicle for each licensed member of the household (or member who relies on another to drive), as part of an overall personal property limit of $50,000 for a single adult or $100,000 for a family.

Can I move to a state with better exemptions before filing?

Not quickly. Federal law generally requires you to use the exemptions of the state where you lived for the 730 days (about two years) before filing. If you moved during that period, you generally look to where you lived for most of the 180 days before that two-year window.

There is also a cap on homestead equity acquired recently. If you bought your home (or added equity from non-exempt assets) within 1,215 days, about 3.3 years, before filing, federal law generally limits the state homestead exemption for that new interest to $214,000. This matters most in unlimited-homestead states like Texas.

Frequently asked questions

Does the bankruptcy trustee sell homes often?

Not usually. Trustees generally sell only when there is enough non-exempt equity to pay creditors meaningfully after sale costs. Accurate valuation and careful exemption planning before filing matter a great deal.

Do I have to reaffirm my car loan to keep the car?

Not always. Reaffirmation is one option, but redemption, Chapter 13 treatment, or, in some districts, simply staying current may be available. Reaffirming keeps you liable for the debt, so it deserves a careful look.

Can I keep a second home or rental property?

Homestead exemptions generally protect only your residence. A second property with equity may be at risk in Chapter 7; Chapter 13 can sometimes let you keep it by paying creditors the value of that equity over time.

What if my spouse and I both own the house?

It depends on how title is held and on your state. In Maryland and D.C., property held as tenants by the entirety may receive special protection from debts owed by only one spouse.

Talk it through with us

Keeping your home and car is often the first worry people bring to a bankruptcy conversation. A careful look at your equity, your loans, and the exemptions available to you can usually show which path protects the most. For an overview of the two main options, see: Chapter 7 vs. Chapter 13: Which Is Right for You? You can also learn more on our Consumer Bankruptcy page.

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This article is general information, not legal advice. Reading it does not create an attorney-client relationship.