Are you a homeowner asking, what happens if I sell my house during Chapter 13 bankruptcy? This filing process can save your home from foreclosure, but that doesn’t mean you can sell it freely. To find out what this means, check out some added details about selling a home during bankruptcy.
To better understand how bankruptcy affects the home selling process, first consider Chapter 7 versus Chapter 13. A Chapter 7 bankruptcy discharges most debt, including credit card bills and more. However, it also typically requires a trustee to liquidate certain assets and use those earnings to pay back your debts.
However, a Chapter 7 bankruptcy is excellent for someone who doesn’t own much property or has many assets. If you don’t have stocks, a real estate portfolio, and the like, there’s nothing to sell during the bankruptcy process.
Chapter 13 bankruptcy is a better choice for those who have property, including a home. This option allows you to keep your property and assets while paying down your debt over time. Filing Chapter 13 bankruptcy prevents creditors from seizing those assets while you repay your debts.
While Chapter 13 bankruptcy allows you to keep your home, this doesn’t mean you can just sell it when desired. A bankruptcy trustee might require you to apply any profits from a home sale to your debt. Also, the court usually requires the trustee’s authorization for that sale beforehand.
Additionally, the law dictates that you need to wait 21 days after filing before you can sell your house. In turn, it’s vital that anyone considering bankruptcy check with an attorney before putting a home on the market. If you’re already in the bankruptcy process, consult with your trustee before selling.
Also, don’t go into a bankruptcy proceeding assuming you can sell your home, keep the proceeds, and lose your debt! The bankruptcy process is often more complicated than homeowners realize. As a consequence, check with an attorney or bankruptcy trustee before making any decision.
As said, the court might require you to apply some profit from a house sale to your debt. However, this doesn’t mean you can’t sell your home during a Chapter 13 bankruptcy. First, notify your trustee of your intent to sell. Second, follow their direction when it comes to applying profit from that sale to your bankruptcy proceeding.
As with your house, bankruptcy courts might require you to apply profit from selling any asset to your debts. Consequently, never sell anything of value without first consulting with your trustee! This can include land, financial investments, and even vehicles.
As said, a Chapter 13 bankruptcy specifically allows you to keep secured property, including a house, car, and the like. However, this doesn’t mean you don’t need to pay back your mortgage loan! Bankruptcy doesn’t discharge secured debts, meaning any debt with collateral, such as a mortgage.
You would typically still need to make your house payment even during a bankruptcy proceeding. To find out more, consult with a bankruptcy attorney near you.
Once bankruptcy has been discharged, you’re free to sell your home and other assets. This discharge process means your case is now closed with the court. Once this occurs, the court and trustee no longer have jurisdiction over your property.
If you’re still unsure of your rights after a bankruptcy, consult with an attorney or your trustee. He or she can advise on your case specifically. Consulting with them also ensures you don’t sell an asset when it's still part of your bankruptcy process.
There is no law that says you cannot buy a house or any other asset after a Chapter 13 bankruptcy. However, remember that lenders check your credit history before offering a mortgage loan. It usually takes two years after a bankruptcy to qualify for an FHA loan. Other lenders might require a longer or shorter timeframe, often depending on your overall financial situation.
Additionally, remember that these rules don’t apply if you’re paying cash for a home. If you’re not using a mortgage lender, you typically don’t need to worry about your credit history. If you still have questions about home buying after a bankruptcy, consult with a real estate agent or attorney.
Chapter 13 bankruptcy allows you to pay back your debts over time while keeping many assets. The court decides how much you’ll pay and to whom during this process. Once you’ve completed your repayments, the court discharges your bankruptcy and closes your case.
However, some changes in your circumstances can make it difficult to follow through with those planned payments. These might include a serious health problem, job loss, and so on. In turn, you can apply for a hardship discharge through your bankruptcy trustee. That discharge may wipe out some debts in your plan.
To qualify for a hardship discharge, you’re required to show that the change in circumstance wasn’t your fault. Also, the change should be something the impacts your ability to repay your debts significantly. For instance, a small wage reduction or temporary layoff might not qualify you for a hardship discharge. Your bankruptcy trustee or attorney can explain this option in greater detail.
Sarasota Home Buyers is happy to help explain what happens if I sell my house during Chapter 13 bankruptcy. Hopefully, this information helped! If you’re ready to sell your house for cash, fast, call our Sarasota cash home buyers. We’ll schedule a convenient, no-cost inspection and price estimate for your home. Additionally, we’re happy to explain the process from start to finish. For more information or your FREE consultation, contact us today.