When debt collectors won’t stop calling and you’re staring at bills you can’t pay, the thought of filing bankruptcy brings mixed emotions. On one hand, there’s hope for relief from the crushing financial pressure. On the other hand, there’s that gut-wrenching fear: “What happens to my home?”
This is the question we hear most often at our Oregon bankruptcy practice. It’s completely understandable—your home isn’t just your largest asset, it’s where your family feels safe, where memories are made, and where you’ve built your life.
Here’s what we want you to know right from the start: Most Oregon homeowners keep their homes when they file Chapter 7 bankruptcy. Oregon’s laws are designed to help honest people get back on their feet, not to leave them homeless.
How Oregon Protects Your Home in Bankruptcy
Oregon has something called a “homestead exemption”—think of it as a legal umbrella that shields your home from creditors. This isn’t some complicated legal loophole; it’s a straightforward protection that Oregon lawmakers created because they understand that everyone deserves a roof over their head.
The New Reality – Oregon Dramatically Increased Home Protection
Starting January 1, 2025, Oregon’s Senate Bill 1595 (the Family Financial Protection Act) raises the homestead exemption limits:
- Filing alone: protect up to $150,000 of home equity
- Filing together (married/filing jointly): protect up to $300,000 of combined equity
These amounts are tied to inflation and will be adjusted annually. For instance, for garnishments issued on or after July 1, 2025, the exemption is $154,200 (individual) / $308,400 (joint household). Different, lower limits apply to debts for child support, spousal support, or criminal restitution.
Real Example: Let’s say you own a home worth $450,000, and you still owe $320,000 on your mortgage. Your equity is $130,000. Under Oregon’s protection, that entire $130,000 would be safe in Chapter 7 bankruptcy.
The Exception You Need to Know About
There is one important exception. If you owe back child support, spousal support, or restitution from a criminal case, your homestead exemption drops to the old amounts: $40,000 for individuals or $50,000 for couples. The state made this compromise to ensure these important obligations get priority.
What Kinds of Homes Qualify?
Oregon’s homestead exemption is surprisingly flexible. It covers:
- Regular houses
- Condominiums
- Manufactured homes
- Mobile homes (if you live in them)
- Even RVs or campers if that’s your primary residence
The key requirement is simple: it has to be where you actually live. Weekend cabins and rental properties don’t qualify—only your primary home gets this protection.
The Big Question – Do I Have Too Much Equity?
This is where many people get nervous, especially if they’ve owned their home for years and seen values rise. Here’s how to figure out if your home fits within Oregon’s protection:
Step 1: Find Your Home’s Current Value
You can start with online estimates from Zillow or Redfin, but for accuracy, consider getting a professional appraisal or look at what similar homes in your neighborhood have sold for recently.
Step 2: Add Up Everything You Owe
Include your mortgage balance, any home equity loans, property tax liens, and HOA assessments.
Step 3: Do the Math
Home value minus everything you owe equals your equity.
Example:
- Home worth: $400,000
- Mortgage balance: $280,000
- Home equity loan: $30,000
- Your equity: $90,000
Since $90,000 is well below Oregon’s $150,000 protection, your home would be completely safe.
What If My Equity Is Higher Than the Exemption?
Even if your home equity exceeds Oregon’s limits, it doesn’t automatically mean you’ll lose your house. Bankruptcy trustees look at practical factors:
- What would it actually cost to sell the house?
- How much would go to real estate agents and other sale expenses?
- After paying those costs and giving you your exemption amount, would there be enough left to make the sale worthwhile for creditors?
Often, trustees decide it’s not worth the hassle and expense to sell homes that are only slightly over the exemption limits.
Oregon vs. Federal Exemptions- Which Should You Choose?
Oregon gives you a choice that most states don’t: you can use either Oregon’s exemptions or the federal bankruptcy exemptions. You can’t mix and match—you have to pick one set or the other.
For homeowners, Oregon’s exemptions are almost always better. The federal homestead exemption is much lower than Oregon’s $150,000/$300,000 protection.
Federal exemptions might make sense if you don’t own a home but have other valuable property you need to protect.
Keeping Up with Your Mortgage
Protecting your equity through exemptions is just part of keeping your home. You also need to stay current on your mortgage payments.
Here’s something important: Chapter 7 can wipe out your personal obligation to pay the mortgage, but it doesn’t eliminate the lender’s right to foreclose if you stop making payments. Think of it this way—the lender can’t chase you for money after bankruptcy, but they can still take the house if you don’t pay.
Should You Sign a Reaffirmation Agreement?
Your mortgage company might ask you to sign something called a reaffirmation agreement. This would put you back on the hook personally for the mortgage debt.
Most bankruptcy attorneys (ourselves included) generally advise against reaffirming mortgages. Here’s why:
The Risks:
- You become personally liable for the full debt again
- If you can’t make payments later, you could lose the house AND still owe money
- You can’t discharge this debt in another bankruptcy for several years
The Reality: Most mortgage companies won’t foreclose as long as you keep making payments, even without reaffirmation. They’d rather receive payments than go through the expense of foreclosure.
That said, every situation is different, and practices can vary among bankruptcy courts. This is definitely an area where you want experienced legal advice.
When Chapter 13 Might Be Better
While this article focuses on Chapter 7, sometimes Chapter 13 (the payment plan bankruptcy) is a better fit:
You might need Chapter 13 if:
- Your income is too high to qualify for Chapter 7
- You’re behind on mortgage payments and need time to catch up
- Your home equity is above Oregon’s limits
- You want to restructure other debts while keeping your home
Chapter 13 lets you keep all your property while paying creditors through a court-approved plan over several years.
The Residency Rule
To use Oregon’s generous exemptions, you need to have lived in Oregon for at least two years before filing bankruptcy. If you haven’t been here that long, you might have to use your previous state’s exemptions, which could be less protective.
The Bottom Line
Here’s what we want every Oregon homeowner to know:
✓ Most people keep their homes in Chapter 7 bankruptcy—Oregon’s laws are designed to protect homeowners
✓ Oregon’s exemptions are generous—$150,000/$300,000 in protection covers the vast majority of homeowners
✓ Stay current on mortgage payments—this is crucial for keeping your home
✓ Don’t let fear of losing your home prevent you from getting help—there are strong legal protections in place
Common Questions We Hear
“Will I automatically lose my house in Chapter 7?”
No. The vast majority of our clients keep their homes.
“What if I’m already behind on my mortgage?”
Chapter 7 won’t help you catch up on missed payments. You’d need to get current quickly or consider Chapter 13, which gives you time to catch up through a payment plan.
“Can I refinance after bankruptcy?”
Eventually, yes, but it will take time for your credit to recover. Whether you reaffirmed your original mortgage can also affect refinancing options.
“What about my homeowner’s insurance?”
You must keep your homeowner’s insurance current to protect both your interest and the lender’s interest in the property.
“What if my home goes up in value after I file?”
Home values are typically measured as of your filing date, so increases afterward usually won’t affect your case.
Ready to Protect Your Home and Your Future?
Every family’s situation is unique. While Oregon’s laws provide strong protection for homeowners, the specifics of your case matter enormously.
At Michael D. O’Brien & Associates, P.C., we’ve helped hundreds of Oregon families get through bankruptcy while keeping their homes. We understand that your house represents much more than equity on a balance sheet—it’s your family’s foundation.
Your consultation is completely confidential. We’ll give you straight answers about your options so you can make informed decisions about your family’s future.
Don’t let fear of losing your home prevent you from getting the debt relief you need. Contact Michael D. O’Brien & Associates, P.C. today to schedule a free consultation and take the first step toward financial freedom while protecting what matters most to you.