Can I Sell My House While in Chapter 13 Bankruptcy?

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Can I Sell My House While in Chapter 13 Bankruptcy

Yes, you can sell your house while in Chapter 13 bankruptcy. Filing for Chapter 13 bankruptcy relinquishes financial autonomy in the form of a bankruptcy trustee tasked with overseeing your estate. Even though you keep possession of any property – such as a home – it becomes part and parcel of the bankruptcy estate. Consequently, your trustee holds sway over major decisions concerning said property; this includes selling a home at their discretion.

If you’re in Chapter 13 Bankruptcy, selling your home doesn’t have to be an impossible feat. Of course, the trustee must approve beforehand, and there will be more paperwork than usual and longer wait times for approvals – but with preparation, it can still happen!

Don’t let bankruptcy stop you from deciding about your life and assets. If you need help with the future, start here for clarity on your next steps. Disclaimer: This article is not legal advice.

You should get legal advice from a law firm specializing in your state’s bankruptcy code. They’ll be able to establish an attorney-client relationship with you, file appropriate motions on your behalf, and keep you abreast of the bankruptcy law relevant to your situation.

Can I Sell My House While in Chapter 13 Bankruptcy Understanding The Proceedings For Selling A House During Chapter 13 Bankruptcy

Understanding The Proceedings For Selling A House During Chapter 13 Bankruptcy

Filing Chapter 13 doesn’t stop you from selling a house; however, any sale requires court permission. Before you take any action, it’s crucial to get a free consultation with your bankruptcy lawyer, who can assure you that the value of your home has been exempted during the bankruptcy proceedings.

Suppose you enlist an experienced real estate broker for your sale. In that case, it’s essential to be forthright with them about the bankruptcy proceedings, as they’ll need authorization from the Bankruptcy Court to receive their commission. Additionally, ensure that your broker is familiar with and willing to coordinate with your bankruptcy attorney.

Remember that once the Purchase and Sale Agreement is finished, you must obtain approval from a Bankruptcy Court before closing. So, delivering your completed agreement to an attorney as soon as possible is essential.

After the sale, it is wise to meet with your lawyer and evaluate whether amending your bankruptcy Plan is necessary due to any modifications in expenses. Taking proactive steps towards revising your plan should not be overlooked.

Can I Sell My House While in Chapter 13 Bankruptcy Chapter 13 vs. Chapter 7-What's the Difference

Chapter 13 vs. Chapter 7-What’s the Difference

Bankruptcy is a last-ditch effort to clear your debt when you can no longer afford the bills. Before you resort to this option, however, you can explore all of the other avenues that may help you get back on track financially.

When choosing a bankruptcy option, individuals usually opt for either Chapter 13 or Chapter 7. The most crucial distinction between the two is how they impact your assets.

Chapter 13 Bankruptcy

Chapter 13, referred to as reorganization bankruptcy, allows you to retain possession of your belongings (like your home and vehicle) if you complete a court-mandated repayment plan extending from three to five years.

Chapter 7 Bankruptcy

If you lack equity in your home and have a minimal income, Chapter 7 bankruptcy may be the most suitable option for you. Liquidation bankruptcy requires liquidating assets to settle outstanding debts.

Chapter 7 bankruptcy requires you to fall below a certain income level for your state or pass the means test to determine if you have any disposable income left over after covering essentials. This available excess can be used towards repaying debt.

If you don’t meet the criteria for Chapter 7 bankruptcy, then your next option is to pursue Chapter 13.

Can You Sell a House While Filing for Bankruptcy

When you file bankruptcy, you can protect a certain amount of property by using exemptions. It is possible to sell or transfer non-exempt assets before going bankrupt; however, it requires caution and attention to detail as failure to do so correctly could be met with severe repercussions – particularly if attempting to avoid paying creditors.

When you go through bankruptcy, creditors won’t be able to take your exempt property for their judgment against you. Commonly protected items include equity in your home and an automobile. That way, when all is said and done, at least something will remain yours!

If you file for Chapter 13 bankruptcy, the law requires that you pay off your unsecured creditors with either an amount equal to or greater than the value of your nonexempt property OR whatever disposable income remains after all necessary expenses.

Can I Sell My House While in Chapter 13 Bankruptcy How to Sell a House While Filing for Bankruptcy

How to Sell a House While Filing for Bankruptcy

For individuals with the financial means to pay back a portion of their outstanding debts, Chapter 13 is an optimal consumer bankruptcy choice. Under this filing process, homeowners can remain in their abode because your trustee will coordinate repayments for creditors such as mortgage lenders.

If you’re considering selling your home while in a Chapter 13 plan, it is essential to inform your attorney as soon as possible and fill out the required documentation.

Communicate your intentions

If you’re in the midst of a Chapter 13 case or have been making payments for years, your lawyer must be informed immediately when you decide to sell your home. The paperwork required for such proceedings can be tedious and time-consuming; hence allowing your attorney enough lead time to notify the bankruptcy trustee and complete the necessary documentation is critical.

Plan ahead

Time is of the essence if you’re in the middle of bankruptcy or have yet to gain your trustee’s approval. Upwards of 30-45 days must be granted for your attorney to negotiate with your trustee and draw appropriate paperwork. Creditors have every right to object to any sale made and repayment plan proposed; thus, enough elbow room must be allocated so that steps can all properly occur.

File a motion to sell

When selling your home while in Chapter 13, the motion to sell serves as a crucial document needed for this process, the documentation must include detailed information about the sale price of your home, its value, and an appraisal to validate it all, plus a plan on how you intend to distribute what is earned from the sale.

Usually, the proceeds are used to pay mortgage payments and any associated closing costs. The trustee will examine this document to grant their approval before the sale can be processed – once they give a green light, you’re on your way!

Close the sale

After the closing process is complete, it’s time to submit a statement of sale document to your lawyer. This motion must be sent to your trustee quickly so that everything can stay on track for you. The statement of sale and motion are essential in ensuring that all legal processes are correctly followed.

After you finalize the sale, you will receive a statement detailing the home’s selling price, any deductions related to closing costs, and funds remaining from your transaction. Furthermore, this is also when payments that were ordered in court proceedings must be made.

Pay your creditors

After the home sale has covered your repayment plan, you should anticipate a discharge of your Chapter 13. The trustee will review and order the decree to be signed by a bankruptcy judge and sent directly to you as a final official document. This is essential for proof that you are no longer in bankruptcy proceedings!

Things You Need to Know When Selling a House During Bankruptcy

Your attorney must file a motion to sell your home and receive court approval. If you can settle on a fair asking price for your home, appointing a realtor and securing support for the sale should be straightforward. Generally, it should take 20-30 days for these motions to receive permission – so even if there are some delays or difficulties, you don’t need to worry too much.

When a motion is filed to approve the sale of an asset, numerous details about the transaction must be included. This includes closing costs, payment amounts, and whether any remaining funds will suffice for repayment in full as prescribed by the bankruptcy court. The judge’s ruling hinges on providing all these elements wholly and accurately.

If your Chapter 13 bankruptcy case is dismissed, any unsecured claims you have not filed will be ineligible for repayment. This means that the interest and penalties accrued on these debts and any defaults would become due once more, essentially leaving it as if you had never initiated a filing in the first place.


Selling a home while in Chapter 13 bankruptcy is possible; however, it requires planning and filing the necessary paperwork. Once you have received court approval for the sale of your property, you can negotiate a fair price and closing costs with your realtor and creditors.

The transaction can proceed as long as all those involved are satisfied with your agreed-upon terms. Be sure to pay back debts with the proceeds of the sale as per court orders, and you should be able to receive a discharge of your Chapter 13 in no time.

Selling to a cash buyer during bankruptcy is an option, and it can help you avoid foreclosure, but it’s essential to consult your trustee or lawyer first. They can help guide you through the process and ensure the bankruptcy court approves the transaction. With their assistance, you can sell your home quickly and securely while in Chapter 13 bankruptcy.

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