Mortgage Knowledge Base readers often wonder what happens to their mortgage if they are forced to file for personal bankruptcy.

We asked the editors of California Bankruptcy what happens to a mortgage if you go bankrupt, either under Chapter 7 or Chapter 13.

In most cases, even if you go personally bankrupt, you can keep your home, as long as you continue to pay your mortgage.

A mortgage is a secured debt, meaning the debt is secured by your house. In other words, you house is the collateral for the mortgage. Whether you are bankrupt or not, the mortgage is still secured by your house.

After a bankruptcy is over and you are discharged from bankruptcy, a mortgage lender is still able to foreclose on the house if the mortgage payments are not made. In other words, if you don't pay the mortgage after a bankruptcy is over, the lender can take your house.

If you owe money on your mortgage and can't pay, and the bank or lender forecloses on your house, the bank will sell or auction your house. If they sell it for less than the amount owing on the mortgage, the shortfall or deficiency can be included in a bankruptcy. In that particular case, because the shortfall is included in the bankruptcy, the lender cannot pursue the debtor for the shortfall on the mortgage.

In California it normally takes at least three months from when you receive a notice of default from the bank to foreclose on your house. If that happens, you have a number of options.

First, you could bring your payments current, by borrowing from a bank or perhaps a family member. Bringing your payments current is normally enough to stop a foreclosure.

Second, you could attempt to refinance your mortgage through another lender. The new lender would replace the original lender.

A third option would be to sell the home quickly, before the foreclosure takes effect. By selling the home yourself you will probably get more money than the bank will get, and that will stop the foreclosure.

If the bank does foreclose on your mortgage, and the bank loses money, personal bankruptcy may be an option. In California and throughout the country, a Chapter 7 personal bankruptcy will discharge the shortfall.

Author Information: Written by Doug Hoyes of California Bankruptcy

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