What Happens to Your House in Chapter 7, 13, or 11 Bankruptcy Michigan

Understand How Different Bankruptcy Chapters Impact Your Homeownership in Michigan

If you're staring down bankruptcy and wondering what will happen to your house, you're not alone.

The rules can feel overwhelming—and different bankruptcy types come with different consequences. Whether you’re just behind on payments or already deep in debt, it's completely normal to feel confused about your options.

Here’s the truth: not all bankruptcies treat your home the same way.

Depending on your income, equity, and which chapter you file under—Chapter 7, Chapter 13, or Chapter 11—you could be at risk of losing your home… or you might have a chance to protect it and catch up.

Understanding the differences is the first step toward making the right decision for your future.

Let’s break it down.

Chapter 7 Bankruptcy: The Liquidation Option

Chapter 7 is often called “straight bankruptcy.” It’s typically used by individuals with limited income and overwhelming unsecured debt, like credit cards or medical bills. But when it comes to your house, Chapter 7 can be risky—especially if you have significant equity.

Here’s how it works:

The bankruptcy trustee may sell your home if your equity goes beyond Michigan’s homestead exemption limit. In 2024, that limit is around $40,475 for individuals and higher for joint filers.
If the home is sold, the trustee uses the proceeds to pay creditors.
If your home has little to no equity—and you're current on payments—you may be able to keep it.
Filing doesn't stop foreclosure permanently. It may pause it temporarily through the automatic stay, but the lender can request to proceed.

Chapter 7 can give you a fresh start, but it also comes with the real possibility of losing your house unless protections apply. Be sure to check current Michigan exemption limits and how they might affect your situation.

✅ Nolo – Chapter 7 Bankruptcy Overview

Chapter 13 Bankruptcy: Keep the House, Catch Up on Payments

If your goal is to save your home from foreclosure and you have a reliable source of income, Chapter 13 may be the better path. Unlike Chapter 7, Chapter 13 is a reorganization plan—not liquidation. That means you won’t be forced to sell your home as long as you can keep up with the court-approved repayment schedule.

Here’s how Chapter 13 protects your house:

It allows you to catch up on missed mortgage payments over 3 to 5 years.
As long as you stick to the plan, foreclosure proceedings are halted.
You can keep your home even if you have significant equity, as long as you pay creditors at least as much as they’d receive under Chapter 7.
It may also help manage other secured debts or reduce unsecured debt burdens.

This chapter gives homeowners time and structure to stabilize their finances while protecting the roof over their heads. It’s commonly used by Michigan families trying to avoid foreclosure while maintaining ownership.

✅ See: How to Sell a House with Late Mortgage Payments in Michigan

Are You Trying to Understand Your Options?

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Chapter 11 Bankruptcy: Rare for Individuals, Common for Businesses

Chapter 11 is typically used by businesses or high-net-worth individuals with complex assets and debts. While less common for everyday homeowners, it can still apply—especially if your property is part of a business venture or you owe more than the limits allowed in Chapter 13.

Here’s what makes Chapter 11 unique:

You keep control of your assets (including your home) as a “debtor in possession.”
You propose a repayment plan to creditors rather than having one imposed.
There’s no fixed time limit—plans can stretch out for many years.
It's more flexible but also more expensive, with higher legal and administrative costs.

If your situation involves multiple properties, rental income, or business-related obligations, Chapter 11 might offer the structure you need. But for most Michigan homeowners, Chapter 13 is usually more practical.

✅ Law.Cornell.edu – Chapter 11 Bankruptcy

Which Chapter Puts Your Home Most at Risk?

Understanding the risk to your home in each bankruptcy chapter is critical before you file. Here’s a quick comparison of how each one affects your homeownership:

Chapter 7:
Highest risk. If you have equity beyond Michigan’s exemption limits, the trustee can sell your home to repay creditors. Even if you're current on payments, equity matters.
Chapter 13:
Moderate risk. You must prove you can stick to a repayment plan, but the structure is designed to help you keep your home and catch up on arrears.
Chapter 11:
Lowest risk if managed properly. You remain in control and propose your own repayment strategy—but the complexity and cost make it unsuitable for most homeowners.

The level of risk depends heavily on how much equity you have, your income, and your payment history. Before filing, it’s important to explore your exemption protections.

✅ Michigan.gov – Homestead Exemption Information
(This link leads to Michigan’s official homestead exemption affidavit form, which outlines qualification criteria.)

"When you mentioned that you would give us an offer within 24 hours and then close quickly I didn’t really believe that we would have the house sold in only 2 weeks. I’m glad I found you.”

Michelle L. - Michigan

Key Factors That Affect Whether You Keep Your House

No matter which bankruptcy chapter you’re considering, several important variables will influence whether you can keep your home. These aren’t always obvious—but they can make or break your ability to stay in your house.

Here’s what really matters:

Your Home Equity:
If your equity exceeds Michigan’s homestead exemption, your house may be at risk—especially in Chapter 7.
Mortgage Payment Status:
Are you current or behind? Falling behind triggers greater risk in Chapter 7, while Chapter 13 may offer a chance to catch up.
Your Income Level:
Steady income is crucial for Chapter 13 and Chapter 11. Without it, repayment plans may not be feasible.
Exemption Rules in Michigan:
Michigan allows a homestead exemption (around $40,475 for individuals) that may protect part or all of your home’s equity. This plays a major role in whether you can shield your home from liquidation.
The Chapter You File Under:
Some chapters are stricter than others. Knowing the differences ahead of time can help you choose the right legal path.

If you’re unsure how these factors apply to your situation, it’s smart to gather your financial details now—before you file. That way, you can make an informed decision about your house.

What If You Want to Sell Your House During Bankruptcy?

Selling your house during bankruptcy is possible—but it works differently depending on which chapter you’ve filed under. The court and your bankruptcy trustee will play a major role, so you can’t simply list the house and walk away with the proceeds.

Here’s how selling works in each chapter:

Chapter 7:
The bankruptcy trustee controls the sale. If your home has significant equity, they may choose to sell it to repay creditors. You’ll need approval, and you likely won’t receive much (if any) of the proceeds unless it’s exempt.
Chapter 13:
You can sell, but it must be approved by the court or trustee. If the home has equity, some or all of the proceeds may go toward your debt repayment plan. If your plan is near completion, selling may help pay it off early.
Chapter 11:
You remain in control of the sale, but the process involves disclosure and approval within your reorganization plan. It’s more flexible, but also more administrative.

If selling is your goal, it’s better to explore your options before filing bankruptcy. In many cases, you may be able to sell quickly for cash, settle debts, and avoid filing altogether.

✅ See: Sell House Fast to Avoid Bankruptcy in Michigan

Gloria B. - Clinton Township, Michigan

“Thank you for contacting me. I didn’t know what I was going to do with this house"

Not Sure Which Path to Take? Explore Before You File.

Choosing between Chapter 7, Chapter 13, or Chapter 11 can feel overwhelming—especially when your home is on the line. But here’s the good news: you don’t have to rush into a decision. The more you understand your options before filing, the more power you have to protect your property and your future.

Many Michigan homeowners find that early planning—before paperwork is filed—opens up more flexible solutions. That might include selling the home on your terms, restructuring debt with a clear plan, or simply avoiding unnecessary risk.

If you’re unsure what to do next, don’t wait until the court takes control. Take a step now, and explore real solutions that put you back in control.

👉 Dennis Buys Houses

See why so many people recommend us...

“Mr. Fassett – thank you for working with us to buy my Mom’s home after she passed away. When you mentioned that you would give us an offer within 24 hours and then close quickly I didn’t really believe that we would have the house sold in only 2 weeks. I’m glad I found you.”

Michelle L. - Michigan

“Thanks for buying my Mother’s home. It was a big help that you were able to buy it without us having to clean it out and get it ready to sell. My mother had accumulated lots of stuff and after the stress of her long illness I was exhausted and I dreaded dealing with all of it. I also liked it that you gave me a very fair price for the home. I’m on a fixed income and that really helped a lot.”

Henry G. - Michigan

“Dennis – thank you for helping us with our Mom’s home. This was a very traumatic experience for us, and we appreciated your patience with all the emotions we experienced during the process. You were really patient and understanding with us during the sale process, and we’re sure that Mom’s home will be in good hands. God Bless.”

Claudia and Nancy M. - Michigan

We Help Michigan Families Navigate These Situations Every Day

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At Dennis Buys Houses, we’re not just cash buyers — we’re trusted problem-solvers who help Michigan families find real answers during difficult times.

Since 2004, we've been helping homeowners across Michigan sell their properties quickly and easily—without the stress of agents, repairs, or hidden fees.

We’re a family-owned, local business with deep roots in the community. Over the years, we’ve helped hundreds and hundreds of homeowners in situations just like yours—whether they’re dealing with delinquent property taxes, foreclosure, or simply needing a fresh start.

If you're dealing with a tough family situation and don’t know where to turn, we’re here to help.

Start here:

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Whether you’re ready to sell or just want to explore your options, we’re here for you. Call us today, and let’s talk about how we can make your situation easier.

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