Can a House Be Sold If You Are Going Through Bankruptcy?

By Heather Frances J.D.

Your house is usually your most valuable asset, especially if it is worth far more than you owe. Depending on the type of bankruptcy, you might have the option to keep your house or voluntarily sell it. On the other hand, the court-appointed bankruptcy trustee may force the sale. However, bankruptcy may even allow you to keep your house if you are facing foreclosure.

Bankruptcy Estate

Once you file for bankruptcy, you create a bankruptcy estate. Technically, you place all of the property and debts you own into the hands of the bankruptcy court to manage while your case is open. The court will appoint a trustee to manage your estate during bankruptcy. You cannot sell or give away any of the property in your bankruptcy estate without the court’s consent.

Chapter 7

Under Chapter 7 bankruptcy, the trustee may seize certain assets and sell them, using the proceeds from the sale to pay your creditors. The trustee can only sell nonexempt assets; exempt assets are excluded from sale. Both state and federal laws provide lists of exempt assets, often including personal items, household appliances, family keepsakes and vehicles. Importantly, a certain portion of the equity in a debtor’s home also qualifies for exemption, and this can allow the debtor to keep his home even if this means his creditors will not be fully paid.

Get a free, confidential bankruptcy evaluation. Learn More

Chapter 7 Discharge

Because of exemptions, the trustee may wind up with no nonexempt assets to sell. In such cases, the debtor’s remaining eligible debts may be discharged -- or erased – as soon as 60 to 90 days after the trustee’s first scheduled meeting with creditors. If you are allowed to keep your home because it qualifies for an exemption, you’re generally better off waiting for your discharge before selling it because liens that creditors have against your house may be discharged when the court issues your Chapter 7 discharge. If you wait to sell until these debts have been erased, you can keep more of the money from the sale.

Chapter 13

Unlike Chapter 7, Chapter 13 bankruptcy does not permit a trustee to seize your assets and sell them. Instead, you must establish a repayment plan in which you make payments on your debts over a three-to-five-year period using your disposable income. If you decide to sell your house while still making payments under the repayment plan, you must first get permission from the court.

Motion to Sell

To get the court’s permission to sell your home, you must file a Motion to Sell. The court will decide whether the sale is appropriate and will oversee the sale process to ensure the terms of the sale are reasonable. Typically, a Motion to Sell takes about a month to gain approval. Once the house is sold, the sales proceeds are usually used to pay off the liens or mortgages on the property. If the seller has money left over, the court may require that he put it toward his repayment plan.

Get a free, confidential bankruptcy evaluation. Learn More
Do I Have to Give Up Things That I Own Outright When I File Bankruptcy?


Related articles

How Does Bankruptcy Affect Homebuying?

Bankruptcy can give you a fresh financial start by allowing you to restructure or erase your debts under a court-supervised process. However, your bankruptcy case doesn’t go away once your court process is complete. Bankruptcy stays on your credit report and can hurt your ability to obtain credit in the future, including home loans.

Are Rent Arrears Cleared by Bankruptcy?

Rent arrears are usually dischargeable in personal bankruptcy -- but that doesn't mean you can continue to live in your rented home or apartment once the bankruptcy court process is through. Eviction may be delayed temporarily through the bankruptcy process, but depending on the type of bankruptcy you have filed, if you are behind in your rent you may find find yourself without a home.

Can They Foreclose on Your Home If You Have Filed Chapter 7?

If you're in over your head with debt, filing under a Chapter 7 bankruptcy is one option to obtain financial relief. However, Chapter 7 may not prevent the foreclosure of your home. On the other hand, and depending on your circumstances and the laws in your state, you may be able to save your home even after declaring Chapter 7 bankruptcy.

Related articles

Can a Primary Residence Be Seized if You File for Bankruptcy?

Although filing for bankruptcy can help avoid being overwhelmed by debts, you may not be able to keep all your assets. ...

What Happens When You Reaffirm a Vehicle After Bankruptcy?

Bankruptcy allows you to get a fresh start financially, clearing up debts by paying some and dismissing others. Filing ...

Can They Take My Car in a Private Bankruptcy in the US?

The vast majority of consumers file for bankruptcy under Chapter 7 or Chapter 13. Chapter 7 bankruptcy allows the court ...

Can I Convert to a Chapter 7 Without Losing My House or Car?

When you file for Chapter 13 bankruptcy protection, the court requires you to make payments on a three to five-year ...

Browse by category
Ready to Begin? GET STARTED