Can You Sell Your House While in a Chapter 13?
If you have fallen behind on your mortgage payments and want to stop foreclosure on your home, you might be wondering whether you can sell your house while in a Chapter 13 bankruptcy. The answer is yes, but there are a few things you need to know before you proceed.
If you’re thinking of Chapter 13 bankruptcy and you want to sell your home, you should get help from a bankruptcy attorney to create an effective plan. Contact a skilled bankruptcy attorney at Allmand Law Firm, PLLC today.
Your Home Is Part of the Chapter 13 Estate
Chapter 13 bankruptcy is appropriate if you have enough money to repay a portion of their debts. It allows you to keep your home since your bankruptcy trustee will set up a repayment plan with your creditors, including your mortgage bank.
However, you might want to sell your home while you are in Chapter 13 bankruptcy if you are under water on your mortgage with no equity or if it is a second property that you are struggling to pay for. To go through with the sale, you need permission from the court and your bankruptcy trustee.
This is due to the fact that when you are going through Chapter 13 bankruptcy, all of your assets belong to the Chapter 13 estate being managed by the trustee assigned to your case. While you keep your assets during the bankruptcy, you have no control over them. This means that you can’t sell or refinance any of your assets, including your home, without the trustee’s permission.
1. You Will Need Permission From the Court
The bankruptcy court must approve the terms of the sale before a debtor closes on the property. This means that you will need to make sure the contract for the sale of your home includes a provision that states that the sale is subject to the approval of the bankruptcy judge.
2. You Will Need to Notify All of Your Creditors
Your bankruptcy attorney must notify all of your creditors before the property is sold. Your creditors have the right to object to the sale of your house. They also have the right to object to your repayment plan.
3. You Will Need to Disclose Details of the Sale to Creditors and the Court
You and your bankruptcy attorney must disclose the details of the proposed sale to both the creditors and the bankruptcy court before you can proceed. Those details will take the form of a Motion to Sell and a Statement of Sale. You must file these with the trustee and court.
The Motion to Sell will include:
- the home’s sale price,
- an appraisal proving the property’s value, and
- the details of how the proceeds from the sale will be disbursed to the creditors.
The Statement of Sale will provide a detailed account of all deductions made and profits earned from the sale of the home. It will include your home’s final sale price, closing costs, how much your mortgage lender is paid, and the amount of any leftover funds.
Once the Motion to Sell is filed, the court will schedule a hearing to give creditors time to object. So, set a closing date for after the bankruptcy court has granted approval for the sale. If the court approves the motion, the sale can proceed.
4. Proceeds From Selling Your House Will Be Used to Pay Your Creditors
All proceeds from the sale of your home become part of the bankruptcy estate. These proceeds must be paid directly to the bankruptcy trustee. The trustee will then disburse the proceeds to the creditors.
If the sale of your home allows you to pay off your repayment plan, you could have the bankruptcy discharged shortly after the sale. The trustee will approve the discharge, which will be signed by the bankruptcy judge. The final decree from the judge proves you are out of bankruptcy.
Should You Sell Your Home During Chapter 13?
It is possible to sell your home in Chapter 13 bankruptcy. But it is also possible that you will not see any of the proceeds of the sale. If you would like a free consultation with a bankruptcy attorney to help you answer the question of can you sell your house while in a Chapter 13, contact Allmand Law Firm, PLLC today.