Can I Sell My Home If I File Bankruptcy?

Selling a home is always a stressful situation. So is bankruptcy. When you combine the two, the stress increases, and so does the potential for problems. Below, we will tell you what you need to know about navigating this situation.

Chapter 7

There are two types of personal bankruptcy. The first we will discuss is Chapter 7. Chapter 7 bankruptcy involves the liquidation of most of your assets in order to pay your creditors.

Under Chapter 7, the results of selling your home will depend largely on the status of your bankruptcy. If you manage to discharge your debts without having your creditors place a lien against your home, you will be able to keep all of the proceeds after paying off any mortgage. If not, you may be allowed to keep only the amount of the homestead exemption, currently $15,000 for individuals or $30,000 for a couple.

If you sell your home prior to filing Chapter 7, the court can go back up to a year or more and take the proceeds to pay creditors. The bankruptcy court is likely to be punitive if it determines that you intended to circumvent your credit obligations with the sale.

Chapter 13

Chapter 13 is a personal bankruptcy that allows you to restructure your debts rather than simply wiping them out. However, this option also allows you to hold onto your property if you wish, rather than having it sold off to pay creditors.

Under Chapter 13, you will need the permission of the court-appointed trustee to sell your home, and the homestead exemption amount remains the same as under Chapter 7. Again, if you sell your home prior to declaring bankruptcy, the court can require the proceeds be used to pay creditors, and it can punish you if it decides you were attempting to cheat creditors by making the sale.

Bankruptcy and selling a home are each complex, stressful procedures, and together they raise even more complexities. If you are considering bankruptcy, seek the guidance of the bankruptcy attorneys at McNeelyLaw LLP.

This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.