People who own properties for which they cannot afford to pay may face challenges whether they file for bankruptcy or not. It is possible to lose a home after filing for Chapter 7 bankruptcy, a process that typically allows for a financial "fresh start" by dramatically decreasing financial liabilities.

Although filing for bankruptcy doesn't always preclude property loss, owners will definitely lose their homes if they fail to pay the mortgage outside of bankruptcy. Homeowners should identify the most appropriate method of property management during bankruptcy proceedings.

According to a Fox Business article, property holders can lose their assets in three ways: outside of bankruptcy, inside of bankruptcy, and in a hybrid scenario. First, the property may be lost outside of bankruptcy, which occurs when a property owner allows payments to lapse. Property owners may still be liable for some of the mortgage balance after the foreclosure, depending on state law, which makes this option less than ideal for many people.

Next, the property may be lost during Chapter 7 bankruptcy when the property owner is unable to financially protect it. That is, if the bankruptcy trustee determines that the equity in a home cannot be protected, it will be sold to cover debts. It is the responsibility of the property owner to find out whether this is likely to happen.

Another scenario exists when property owners combine strategies to combat the loss of a home. Owners can file bankruptcy immediately before foreclosure proceedings are finalized, which can temporarily prevent the property's sale. This can allow the homeowner a little additional time to examine additional options, but does not protect the property indefinitely.

Source: Fox Business, "Can bankruptcy cause me to lose my homes?" Justin Harelik, Feb. 7, 2012