Chapter 7 is not designed to save property where payments have not been made and foreclosure has begun. However, Chapter 13 can help in that exact situation.
The job of the Chapter 7 Bankruptcy Trustee is to seize any non-exempt property and divide up those proceeds among creditors. There are many state and federal exemptions that usually protect the majority of household items and often a home or first car from seizure. Debtors with boats, motor homes, second houses or other property subject to seizure may prefer Chapter 13 bankruptcy to protect their property from being seized.
Mortgage paperwork mess: Next housing shock?
(CBS News) If there was a question about whether we’re headed for a second housing shock, that was settled last week with news that home prices have fallen a sixth consecutive month. Values are nearly back to levels of the Great Recession. One thing weighing on the economy is the huge number of foreclosed houses.