In this article we will talk about whether you can sell your home during bankruptcy and the repercussions of doing so. When you file Chapter 13 you make payments to the Chapter 13 trustee, who in turn distributes the funds to your creditors. In a Chapter 13 your monthly payments will be set by a number of factors including the amount of income and expenses you have, your equity in your property and assets, or by the amount of debt you owe.
Selling Real Estate During Bankruptcy
In many cases, client want to sell their home during bankruptcy. You may sell your home, however, you must request the Court to do so. To do this, you must file a Motion to Sell Real Property with the Court. An experienced bankruptcy attorney will be able to do this for you. To file the motion you will need at least the following:
1) Legal Description of the Property (this is found on your grant deed or deeds of trust)
2) Escrow Instructions
3) Estimated Closing Statement
4) Updated Schedule I and J of your bankruptcy petition (Income and Expenses)
Consequences of Selling Your Home During Chapter 13
First, there is the possibility that your bankruptcy trustee will require that all proceeds from the sale of your home go towards your Chapter 13 bankruptcy if your creditors are not paid in full through the Chapter 13 plan.
Second, if the creditors are still owed money after the sale of your home and proceeds are paid out, the trustee might go after any excess income you have. For example, if your new rent payment is less than your mortgage payment, then you might have excess income. The trustee may require you to pay that excess income in your Chapter 13 plan.
As you can see, there are a number of issues that require careful attention prior to proceeding with the sale of a home during a Chapter 13. It is strongly recommended that you contact your attorney, or other experienced bankruptcy attorney to go through all of these matters with you.