How to Sell a House When Filing for Bankruptcy

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Bankruptcy can take a toll on your emotional and mental health. You may be worried or nervous about selling a house while filing for bankruptcy. Sometimes you may need more knowledge or resources to navigate the process.

Generally, in the bankruptcy filing, your home, and all your other property is part of the bankruptcy case. Bankruptcy protects you from creditors who might want to initiate foreclosure proceedings on your home, but you cannot sell your home without express approval from the bankruptcy court. 

That’s a challenging situation, but we’re here to help. It’s important to know what you’re facing to make the right decision as you go forward. To assist you with that decision, we explain the following: 

  • Process of selling a house when filing for bankruptcy
  • Chapter 7 vs. Chapter 13 Bankruptcy, 
  • Selling a house before and during bankruptcy
  • How you might keep your home after filing for bankruptcy

Selling a House When Filing for Bankruptcy

Typically, selling the a house when filing for bankruptcy is only allowed if you get permission from the judge. This restriction prevents you from selling your:

  • Appliances
  • Car
  • Furniture
  • House
  • Jewelry

There are more items the court restricts, but you get the idea. The court doesn’t care if you owned the things before you filed or after. If you want to sell any property or real estate, including your house, you’ll need to get in touch with an attorney who’ll guide you through the process. 

In general, your attorney files a motion to allow a sale, and the bankruptcy law dictates that he court must approve the deal before you can take the next step. 

In general, when you sell a house when filing for bankruptcy, you’ll need to provide the following information: 

  • Who you’re selling to, and if they’re a friend or relative
  • Sales price
  • Closing date

Chapter 7 vs. Chapter 13 Bankruptcy

When you can’t pay your debt, you’re experiencing insolvency. It’s bothersome, and sometimes bankruptcy is the only way to get a fresh start, and you want to know more about it. You’re not alone if you’re unsure about the differences between Chapter 7 and Chapter 13 bankruptcy petitions.

Most people outside the legal profession don’t know the critical difference between the two types of bankruptcy processes. Here are the key differences: 

  • Chapter 7 doesn’t require you to pay back your debts. 
  • Chapter 13 requires you to pay back debts with a court-approved repayment plan. 

Let’s go over some terms that apply to both types of bankruptcy. The court grants an automatic stay when you file either Chapter 7 or Chapter 13 bankruptcy. This court order protects you from creditors. That may mean the stay prevents the following:

  • Evictions 
  • Lawsuits
  • Repossessions
  • Utility disconnection

An exception to an automatic stay occurs if you file bankruptcy more than once a year, and you might get a shorter stay or none at all. 

One final thing to note about bankruptcy, it will stay on your credit report for seven-to-ten years and will negatively impact your credit score.

A stack of papers required to file Chapter 7 bankruptcy

Chapter 7 Bankruptcy

To qualify for Chapter 7 bankruptcy, your household income has to be lower than the median state income, also called the means test. If you do not qualify via the means test, you can subtract your monthly expenses from your income. If you don’t have enough money to pay your creditors via a Chapter 13 payment plan, you qualify for Chapter 7. 

When you file for Chapter 7 bankruptcy, you won’t have to get on a repayment plan. Instead, the court appoints a bankruptcy trustee who will sell your nonexempt property to settle your debt. 

Federal court, each state, and local municipalities have their own rules for bankruptcy exemptions. But in general, these exemptions apply to your property: 

  • Homestead exemption that protects your home equity
  • Insurance policy cash value
  • Non-luxury personal property
  • Public assistance like Social Security, Unemployment, Welfare 
  • Retirement plans
  • Tools for your job

In accordance with federal law called the Bankruptcy Code, the trustee sells the debtor’s assets and uses the money from the sale to pay creditors. This type of debt relief is called liquidation.

Most people will file for Chapter 7 if they meet the qualifications because it doesn’t require you to pay back your debts. Chapter 13 requires you to pay back debts with a court-approved repayment plan. 

Chapter 13 Bankruptcy 

Chapter 13 is for people that have debt liabilities, but have regular incomes. That means you have enough disposable income to repay your creditors. The amount you must repay depends on the following factors: 

  • Income
  • Debt
  • Amount of property you own 

Chapter 13 is a reorganization of your debt. It’s idealy designed for people who don’t qualify for Chapter 7:

  • but struggle to pay their debts
  • with obligations they can’t discharge, like alimony, child support, student loans, or wage garnishments
  • are behind on car or house payments and want to get current to keep the asset

You will usually make the payments over a three-to-five-year repayment plan. Chapter 13 is for indivuals, but corporations or partnerships file for Chapter 11 bankruptcy.

Selling a House Before Bankruptcy

In general, selling a home before bankruptcy is allowed. Remember, the court generally categorizes a house as exempt property. 

Since a house is an exempt property, the trustee would not have been able to sell your home as part of bankruptcy proceedings. 

If you need to get rid of a house that’s causing your problems and want to get a fair offer for your house, contact us. We’ll talk to you and provide a FREE, NO OBLIGATION offer for your home. The cash infusion from our fair offer may be what you need to stave off bankruptcy or pay back your creditors. 

A judge deciding whether to allow the sale of a house in bankruptcy

Selling a House During Bankruptcy 

As soon as you file for bankruptcy, your property becomes part of the process. The process makes selling a house during either bankruptcy form subject to the court’s control. 

Selling a house during Chapter 7, you need the court’s permission. If your court-designated bankruptcy trustee wants to sell the house, they will also require approval. 

Selling a house during Chapter 13 is generally allowed, but you need to get permission from your trustee to sell. 

If you decide to sell, you must file a Motion to Sell Real Property, which includes the following: 

  • Property description
  • Sales price
  • Purchaser, and any relationship to them 
  • Identity of a third party who may help market the property
  • Mortgage issuer
  • Itemized list of closing costs
  • Itemized disclosure of proceeds from the sale

The proceeds from the sale usually go to paying your creditors. 

Sometimes your trustee may decide that selling your home is the ideal way to settle your debt with creditors. The trustee will have to provide the same information about the house and convince the court that selling your home will not harm you. 

In most states, your home is exempt and thus not subject to a trustee-initiated sale. 

Exemptions and bankruptcy protection apply to your primary residence. Investment properties are protected in the same way. That means when you file bankruptcy proceedings, a trustee can initiate the sale unless you prove that a sale will cause you undue harm. 

Two young homeowners arguing with their lawyer about keeping their house after bankruptcy

Can I Keep My Home After Filing Bankruptcy

When you file, the first question you probably have is, “can I keep my home after filing for bankruptcy?” The answer depends on your specific situation and whether you filed for Chapter 7 or Chapter bankruptcy. 

Can I keep my home in Chapter 7?

The court will eliminate your unsecured debt when you file for Chapter 7 bankruptcy. That type of debt is unattached to tangible assets like an automobile or a house, so it is considered unsecured. Some examples of unsecured debt include credit card payments or personal loans. 

Through the process of liquidation, the trustee sells your nonexempt assets and uses the money from the sale to pay your creditors according to the Bankruptcy Code

Now, your house is exempt, but if you can’t keep your mortgage payments, you may lose the home anyway. Before filing for bankruptcy, you should talk to your mortgage lender and work a plan out with them. It’s too late after you file for bankruptcy because the court controls your assets.

Typically, you can keep your home after filing bankruptcy if one or more of the following conditions about you are true:

  • Contacted your lender and worked out a loan modification 
  • Current with your mortgage payments
  • owe more than the house is worth
  • Protected by a homestead exemption
  • Showed the court you can make on-time payments

Can I keep my home in Chapter 13?

Chapter 13 bankruptcy is designed to let you keep your home. With Chapter 13 bankruptcy, the bank, court, and creditors decide on a three-to-five-year repayment plan. 

The court does not sell your assets to pay the creditors. When the repayment plan is complete, the court enacts a bankruptcy discharges of any remaining unsecured debt, like credit cards. 

The court and creditors create the repayment plan for you to pay your mortgage, provided you can afford it. If you’re behind on the mortgage, the court will lump it into the repayment plan. But you’ll have to keep making current mortgage payments. 


Selling a house when filing for bankruptcy can be distressing. But it doesn’t have to be. Remember the key things about the process:

  • When filing for bankruptcy, the court controls your assets, and you must get their permission to sell your home.
  • Chapter 7 bankruptcy lets you sell your assets to pay your creditors, then the court discharges your unsecured debt (credit cards, personal loans). 
  • Chapter 13 bankruptcy is the repayment plan.
  • In both cases, you can probably keep your home if you can afford it.   

You might have problems paying for your home. You want to avoid losing your home to foreclosure because there’s no money for you. Even after you file bankruptcy, paying your mortgage is still an arduous task. 

You need to get rid of the home quickly and for a fair price, but selling can be an expensive hassle. A cash offer might be just the right solution for you. Our team of experts is ready to chat with you, get some information about your property, and make a cash offer. 

That’s it; you’ll avoid the hassle of the selling process. We’re easy to work with and can buy your house on your timeline and terms. Contact us to find out how we can help you today! 

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