Selling a House During Bankruptcy - Total Bankruptcy
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Selling a House During Bankruptcy

One's ability to sell a house during bankruptcy depends on a number of different factors, including the chapter of bankruptcy they filed, the nature of the filer's debts, and the rules of the bankruptcy jurisdiction.

Many courts, though, look favorably on selling a house during bankruptcy, because the proceeds from the sale may potentially go a long way towards meeting a person's debt obligations.

To learn more about what you may sell during bankruptcy, fill out the brief form below for a free consultation with an attorney in your area.


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Selling a House During Chapter 7 Bankruptcy

There are two primary forms of personal bankruptcy, Chapter 7 and Chapter 13. When a person files for Chapter 7 bankruptcy, the bankruptcy court typically takes possession of some of the filer's assets.

These assets are then used to pay off debts. Important exceptions in this process, however, are known as bankruptcy exemptions, which may allow homeowners to sell their houses during bankruptcy. Here's how this may work:

  • While exemption rules vary according to state, many states allow filers to keep a certain amount of equity in their homes.
  • If the bankruptcy trustee in your case deems your house a protected asset, the house is yours to sell or keep as you please.
  • While sorting the issue out with a trustee may take a few weeks, a filer may then be able to sell the house and use the proceeds to help pay off debts or to put toward a new home purchase.

Some state exemption laws even have provisions that protect money received in a recent home sale.

Since a filer's ability to sell a house during bankruptcy depends largely on state laws, speaking with a local bankruptcy lawyer may help provide more information.

Selling a House During Chapter 13 Bankruptcy

While selling a house during Chapter 7 is no guarantee, most filers are able to sell their homes during Chapter 13. In Chapter 13 reorganization, filers are able to make payments on a restructured debt plan while continuing to work.

If a filer is looking to sell a home during Chapter 13, the following steps may be helpful:

  • First, notify your lawyer of your intention to sell your home.
  • Then, notify the bankruptcy trustee and judge of your plan. Your lawyer may help smooth this process.
  • Finally, be honest with potential buyers about your bankruptcy status. Being upfront about your pending bankruptcy at the start may help ease buyers' concerns.

If, instead of selling your house, you are looking to prevent home foreclosure, Chapter 13 may be able to stop foreclosure proceedings against your home by allowing you to catch up on missed mortgage payments over time.


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