We are well in to 2020 and the current real estate market is hotter than it has been in a long while. This has created a dilemma among those who filed for bankruptcy, as most chapter 13 clients would like to cash in on this boom in real estate and sell their house. So, can someone who is an active chapter 13 sell his house? The simple answer to this question is ‘Yes’, however, you should get the necessary permission from the court.
Before getting in to ‘How’ to go about selling your property when in Chapter 13 bankruptcy, let us understand more about bankruptcy. The moment we officially file for bankruptcy, our house and all our possessions become a part of the bankruptcy case. Even if there are creditors, they can’t foreclose on our possessions because all our properties are shielded under bankruptcy protection. There is no way we can sell our properties under Chapter 13, without obtaining permission from the bankruptcy court. This process will need a trustee, and only the trustee can ask the court for the necessary permission to sell the properties on your behalf.
Before going further, we should also understand the basic difference between Chapter 7 and Chapter 13. Chapter 7 makes it very difficult to sell your home, the way you want it. It is extremely important that you get necessary legal help from reputed law agency before your attempt to sell. Agencies like Friscia real-estate law are known for their expertise in this area, as they have helped clients sell their house while under bankruptcy. If you are under Chapter 13, the law permits you to keep or sell your house without causing financial harm to your lender. Avail expert advice to decide if you want to sell or refinance your house under Chapter 13.
If you are under Chapter 13 and have decided to sell the house, then your lawyer would have to file a motion to sell the property with the bankruptcy court. This should be done meticulously, and we recommend opting for the right lawyer, as all the particulars like selling price, the details of the creditors, and what you would do with the proceeds. This requires a lot of paper work.
The Trustee:
Eventually it all comes down to the trustee. It will be the court-appointed trustee who will decide if it is best to sell your house to meet the creditors’ demands. Even if we provide the trustee with all the details, it will be his job to convince the court about the proceeds. Though bankruptcy is a Federal issue, there are several state exempts that you need to know before proceeding with selling your properties. In several states a part of the sale value of your house will be protected as ‘exempt’, in some states even a part of your car’s value is protected as exempt. These exempts will help you with a new start. Talk to your lawyer about these things before you proceed.
Decided to Keep Your House?
Owner-Occupied Vs Investment Property: The difference when it comes to bankruptcy is quite obvious, while your owner-occupied home has some bankruptcy protection, investment properties have no such protection. You can never keep your investment homes from getting included in bankruptcy. Once the property goes on sale, you need to worry about the extra money after the sale is completed.
While the extra-money is dependent on the sale value, with a booming real estate market, you might get a good price. However, you might also get exempts and it will help you with a new start. For instance, in Georgia, if you are single then you will get a maximum exempt of $21,500. If you file as a couple, then a maximum exempt is $43,000. You should check the exempt amount for your state.
However, if you want to keep your house, and you have filed for Chapter 7, then things will get tricky. For instance, if you have started off filing Chapter 7 bankruptcy, but later don’t want to sell your house, then you may be able to switch to Chapter 13, so get in touch with a good law agency, to decide on what exactly you should do.
Good Luck.
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