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Will Bankruptcy Stop a Foreclosure? Chapter 13 vs. Chapter 7
Somebody has already told you that bankruptcy stops foreclosure. It gets repeated so often it hardens into fact, and it is close enough to true that I understand why. Here is the more useful version. Filing pauses a pending foreclosure while the case is open. Whether you still own the house when it ends depends on the chapter you filed and the equity in the property.
Which is why most of what you have read about how bankruptcy and a Maryland foreclosure interact is out of date. In Chapter 13 you do not lose the house to the bankruptcy itself. In Chapter 7, equity is the risk, because a trustee can sell a house with equity above what Maryland protects. That number changed on June 1, 2026.
I have spent more than 25 years across kitchen tables from Maryland homeowners in this spot. Most of the people we talk to never sell us anything. This is free either way. Read who we are and how we get paid if you want to.
The Short Version
Neither chapter erases a mortgage lien. United States Courts guidance on Chapter 7 states that a discharge does not extinguish a lien on property.
Chapter 7 gives you no way to catch up missed payments. Chapter 13 does, under Section 1322(b)(5), across a three or five year plan.
Maryland protects $125,000 of home equity for an individual under Courts and Judicial Proceedings Section 11-504(f)(1)(ii), in cases filed on or after June 1, 2026. Before that, $31,575.
Married Maryland filers cannot double it. Section 11-504(f)(1)(iii) caps the total at $125,000 on the same property.
A Chapter 7 trustee sells only where the sale leaves meaningful money for unsecured creditors after the liens, costs of sale, and your exemption paid to you in cash. Otherwise the trustee abandons the house under Section 554.
What Filing Actually Does to a Foreclosure Sale
The pause is real and it is temporary. Filing puts a hold on collection activity, including a scheduled Maryland foreclosure sale, and it runs while the case is open. A lender can ask the court to lift it. The Bankruptcy Court Miscellaneous Fee Schedule prices that motion at $199.
The hold also dies with the case. Dismissal dissolves it and the sale proceeds. The usual way a Maryland homeowner lands there is Section 109(h), which bars anyone from being a debtor unless they got a briefing from an approved nonprofit credit counseling agency in the 180 days before filing.
That catches people who file at the last minute. It catches them hard.
If you have a Notice of Intent to Foreclose and nothing has been filed in court, you are earlier than you think. Maryland Real Property Section 7-105.1(c) requires that notice at least forty-five days before a foreclosure action is filed, so the options before a case reaches the circuit court are a different conversation.
Can you file bankruptcy after the foreclosure auction and still keep the house?
No, not by catching up the missed payments. Section 1322(c)(1) allows a default on your principal residence to be cured only until the home is sold at foreclosure sale. The United States Bankruptcy Court for the District of Maryland held in In re Denny that here, the sale happens when the auctioneer’s gavel falls, not when the circuit court later ratifies it.
That is the cruelest timing rule in Maryland practice and almost nobody knows it. Weeks can pass between auction and ratification. You may still be living there. Nothing felt final.
It is. Here is how a Maryland foreclosure auction actually works.
If you do not know whether your sale date has passed, that is a five minute call. Free, and you are never required to sell. The questions we get asked most cover much of this.
Chapter 7: A Short Case, a Clean Discharge, and No Way to Catch Up
Chapter 7 is a liquidation. A trustee gathers whatever an exemption does not protect, sells it, and pays unsecured creditors. It is short. United States Courts guidance puts the discharge generally sixty to ninety days after the date first set for the meeting of creditors, itself twenty-one to forty days after filing.
Court fees are $338. What Chapter 7 cannot do is get you current.
A mortgage is two things at once: a personal promise to pay, the note, and a lien on the house, the deed of trust. A Chapter 7 discharge wipes out liability on the note and does not touch the lien. That matters in Maryland, where a foreclosing party can pursue a deficiency judgment after a ratified sale under Maryland Rule 2-647. The discharge defeats that.
Chapter 13: The Only Chapter With a Cure Mechanism
Chapter 13 is a court-supervised repayment plan running three or five years, and a Chapter 13 trustee does not sell your house. Section 1322(b)(5) lets the plan cure the default over the term while you keep making the regular payment. Your servicer files a claim for the full arrearage, including escrow shortage, late fees, and foreclosure costs.
Here is what people are not told. Section 1322(b)(2) forbids modifying a claim secured only by your principal residence. No principal reduction, no new rate, no extended maturity. Time to cure, not a rewritten loan.
I have lost count of the homeowners who expected Chapter 13 to lower the house payment. It adds a second one.
Plan length is set by income, not preference. Under Sections 1322(d) and 1325(b)(4) it runs three years where your current monthly income annualized falls below the Maryland median for your household size, five years where it is at or above. Being above the median often helps: a longer plan means a lower payment. These United States Trustee Program figures apply to cases filed on or after July 15, 2026.
Household size | Maryland median family income |
1 earner | $86,928 |
2 people | $114,611 |
3 people | $135,949 |
4 people | $166,173 |
Each additional person above 4 | Add $11,100 |
A woman in Waldorf called me after her hours got cut. She was months behind, she had read that Chapter 13 would let her keep the house, which is true, and nobody had shown her the payment.
I drove out, we sat at her kitchen table with the mortgage statement, and I asked what she brings home now. Then we did the division together. She went quiet. Then she said, I think I need the five year one.
Here is that arithmetic in the abstract. Take a homeowner $28,000 behind. Across thirty-six months that is roughly $778 a month toward arrears alone. Across sixty months, roughly $467.
Neither figure includes the standing trustee’s percentage fee, capped at five percent under Section 326(b), or attorney’s fees. All of it sits on top of the regular mortgage payment. Chapter 13 buys time, not money.
You do not have to work this out alone. Free consultation, every option explained, including the ones that do not involve us. Tell us what your situation looks like.
The question | Chapter 7 | Chapter 13 |
Can it cure missed mortgage payments? | No mechanism at all | Yes, across three or five years under Section 1322(b)(5) |
Can a trustee sell the house? | Yes, where equity above your exemption leaves meaningful money for unsecured creditors | No. The trustee does not sell the debtor’s house |
What does nonexempt equity do? | It is the thing that puts the house at risk | It raises what the plan must pay unsecured creditors under Section 1325(a)(4) |
Does it end personal liability on the note? | Yes, which defeats a Maryland deficiency judgment | Handled through the plan and the Section 1328 discharge |
How long does it run? | Roughly eighty to one hundred thirty days | Three or five years, set by income against the Maryland median |
Court filing fees | $338 | $313 |
Eligibility debt limits? | None | Yes. Under Section 109(e), unsecured debts under $526,700 and secured under $1,580,125 |
The Maryland Number That Changed on June 1, 2026
Maryland’s owner-occupied residential real property exemption is $125,000 for an individual, under Courts and Judicial Proceedings Section 11-504(f)(1)(ii), for cases filed on or after June 1, 2026. It got there through Senate Bill 939, enacted as Chapter 400 and approved by the Governor on May 12, 2026.
The figure before that date was $31,575. Read that twice.
Two limits. The Act is prospective only, so a case filed on or before May 31, 2026 uses the old number. And Maryland opted out of the federal exemptions under Section 11-504(g), so you cannot elect the federal set.
A mildly strong opinion, about the state of information rather than about you. Most of what ranks on this topic is wrong, some of it by six figures. As of late September 2026 the General Assembly’s own statute page for Section 11-504 still showed the old language, and even the Maryland People’s Law Library contradicts itself lower down its own page. If a page does not mention June 1, 2026, assume it was written for a different Maryland.
What that does to a real house: a home worth $340,000 with a $250,000 first mortgage has $90,000 of gross equity. Today all of it is protected and the estate has nothing to administer. Before June 1, 2026, that same homeowner had roughly $58,000 unprotected and was a candidate to lose the house. Same house. Different date.
Does having equity in my house make bankruptcy riskier in Maryland?
In Chapter 13, no. Equity raises what your plan must pay unsecured creditors under the best interests test in Section 1325(a)(4), but the house is not sold. In Chapter 7, yes. Equity above your exemption is what turns a routine case into one where a trustee has a duty to sell.
When a Chapter 7 Trustee Actually Sells a House
Not simply because there is equity. A trustee sells because the sale will leave meaningful money for unsecured creditors after everything ahead of them is paid. That is why homeowners with moderate equity usually keep their houses. The order of payment:
Every mortgage and lien, paid in full at settlement. A trustee cannot sell out from under a first mortgage without satisfying it.
Ordinary costs of sale: real estate commission, transfer and recordation taxes, settlement charges, and any clean-out the trustee funds.
Your exemption, paid to you in cash. The $125,000 does not evaporate because a trustee is selling. The trustee writes you a check.
The trustee’s compensation, capped by Section 326(a): 25 percent of the first $5,000 disbursed, 10 percent above $5,000 to $50,000, 5 percent above $50,000 to $1,000,000, 3 percent above that.
Other administrative expenses, including any professionals the trustee hires.
Only what is left goes to unsecured creditors. Where that is small or nothing, the trustee abandons the property under Section 554 and the house stays yours. A $600,000 house owned free and clear is the far end: $475,000 unprotected before costs, and a trustee will sell.
The middle is uncertain. A $475,000 house with a $290,000 mortgage leaves $60,000 above the exemption on paper, but commission and the trustee’s compensation shrink that fast. That range needs an attorney, not an article.
A man in Prince George’s County reached out a while back. Retired, house nearly paid off, not a dollar behind. What was crushing him was medical debt. Somebody at his church told him a trustee would take the house, so he sat on it for months.
We sat down and I asked what he owed on the mortgage, and whether anyone had recorded a judgment against him. He did not know the second one. Almost nobody does. What I could tell him was that the test is not whether you have equity, and that the Maryland number had changed.
A filer with unprotected equity has three ways out, all decided before filing. Buy the equity back from the trustee, which usually means family money. Convert to Chapter 13, where Section 1325(a)(4) lets you keep the house and pay that value to creditors over the plan. Or sell beforehand, setting price and timing yourself, which is one option among several. Trustees scrutinize pre-bankruptcy transfers, so ask an attorney first.
Two Maryland Facts Missing From Almost Every Page
If you are married, how the house is titled may matter more than the exemption
Maryland recognizes tenancy by the entireties, a form of co-ownership only married couples can hold, where neither spouse owns a divisible share. A creditor of one spouse alone cannot reach it. Section 522(b)(3)(B) lets a debtor exempt that interest to the extent state law exempts it from process.
The limit is joint debt. The Fourth Circuit held in Sumy v. Schlossberg, 777 F.2d 921 (4th Cir. 1985), that entireties property is not exempt to the extent of joint creditors’ claims.
So a married homeowner filing alone with individual debts may protect equity well above $125,000. One with significant joint debt gets far less. If both spouses file, the protection is gone.
This is where an attorney earns their fee. We can connect you with someone who handles these in your county, and the introduction costs you nothing.
Judgment liens on your house got much easier to remove
Section 522(f) lets a debtor avoid a judicial lien to the extent it impairs an exemption. Maryland judgment creditors routinely record judgments in the land records, putting a lien on your home. Because the exemption measuring that impairment went from $31,575 to $125,000, the lien a homeowner can strip is far larger. Judicial liens only. Not your mortgage, not most tax liens.
What I Tell People Who Are Trying to Decide
It usually is not really Chapter 7 against Chapter 13. It is two questions. Are you behind, and do you want the house. If you are behind and you want it, the only real question is whether the cure plus the regular payment fits your budget. If you are current, the question is equity.
There is a third answer people hate and I give anyway. Sometimes the house cannot be kept. If that is where you are, a Chapter 7 discharge still does real work, because it closes the door on a Maryland deficiency judgment instead of leaving it open.
If you are in default you have already gotten the postcards. I have held this opinion a long time: the operators who turn up at the door with an offer and a deadline attached are not in the business of mentioning that Chapter 13 exists. Knowing how to tell a legitimate buyer from a predatory one is worth more than anything in your mailbox.
If this sounds like where you are, you already know you need to talk to somebody who has seen it before. Tell us where you stand and we will tell you what we see, point you toward the right attorney, and say so plainly if we are not the right help. It costs nothing. For the fuller picture, start with what bankruptcy does and does not do to a Maryland foreclosure.
Frequently Asked Questions
Will filing bankruptcy stop a foreclosure sale in Maryland?
Filing pauses a pending foreclosure while the case is open. It is not permanent. A lender can move the court to lift that hold, and if the case is dismissed the hold dissolves and the sale proceeds. Whether you keep the house past that point depends on the chapter you filed and on whether you can cure the arrears.
How much home equity can I protect in a Maryland bankruptcy?
For cases filed on or after June 1, 2026, Maryland protects $125,000 of equity in owner-occupied residential real property for an individual, under Courts and Judicial Proceedings Section 11-504(f)(1)(ii). The prior figure was $31,575. Maryland has opted out of the federal exemptions under Section 11-504(g), so you cannot choose the federal set instead.
Can my spouse and I double the Maryland homestead exemption?
No. Section 11-504(f)(1)(iii) caps the total at $125,000 where more than one individual in the same bankruptcy proceeding claims the exemption on the same property. Married Maryland debtors filing jointly cannot reach $250,000. If the house is held as tenants by the entireties and only one spouse files, a different analysis applies and you should raise it with a bankruptcy attorney.
Will a Chapter 7 trustee sell my house if I have equity in it?
Only where a sale would produce meaningful money for unsecured creditors after the mortgage and liens, the costs of sale, your $125,000 exemption paid to you in cash, and the trustee’s compensation under Section 326(a). Where little or nothing is left, the trustee abandons the house under Section 554 and you keep it.
Is it too late to file if my house already sold at the foreclosure auction?
Too late to cure the default, yes. Section 1322(c)(1) permits a cure only until the home is sold at foreclosure sale, and the United States Bankruptcy Court for the District of Maryland held in In re Denny that in Maryland that moment is the fall of the auctioneer’s gavel, not the later ratification by the circuit court.
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