You can typically sell your home in Chapter 13 bankruptcy with the approval of the court, but it’s more difficult to sell your home in Chapter 7. Once you get court approval to sell your home in bankruptcy, you can sell to any buyer including a home buying company. The benefit of selling your home to a cash buyer like JWS Acquisitions vs. a traditional buyer is that our market-driven cash offer on your home would still be the same whether or not you’re in bankruptcy.
So you’re going through a bit of a rough patch. It could have been credit card debt or medical bills that got you here. Either way, now you’re considering filing bankruptcy and you’re wondering if you can sell your house.
Or maybe you’re already in Chapter 13 or 7 and you’re wondering if you can get some quick cash by selling your property.
This article discusses the differences between selling your house in Chapter 13 and 7 bankruptcy, the challenges you’ll have to consider during a bankruptcy sale, and your various options.
Chapter 7 vs. 13 Bankruptcy
Most people filing bankruptcy in Georgia will want to file under either Chapter 13 or Chapter 7. You can file either individually or as a couple if you’re married. Chapter 7 Bankruptcy is known as a liquidation of assets while Chapter 13 is a reorganization of assets.
Here are the requirements to qualify for bankruptcy in Georgia:
- Chapter 7 Bankruptcy: Liquidation
- Cannot have filed during the prior eight years
- Must meet a “means test” that considers the median income of your household size
- Chapter 13 Bankruptcy: Reorganization
- Requires regular income
- Must have less than $394,725 of unsecured debt (e.g. credit card debt)
- Must have less than $1,184,200 of secured debt (e.g. home, car)
Now, what if you want to sell your home in Chapter 13 or 7? Is it possible? Let’s get into it…
Can you file bankruptcy then sell your house?
Yes, you can typically sell your home in Chapter 13 bankruptcy but you have to agree to a court-mandated 3- or 5-year repayment plan (called a wage earner’s plan) of your debts. You must also pay back your mortgage company in an amount that’s equal to the amount of equity in the property.
In Chapter 7, on the other hand, most of your property is typically sold by your court-appointed bankruptcy trustee (aka the person in control of administering your property) and used to pay off your debts. So if the trustee determines there’s equity in your home, then they may sell it to pay creditors. If there’s no equity in it, then they may not want to sell.
Let’s dig into these details a bit more.
Can I sell my home while in Chapter 13?
Yes, you can sell your house while in the middle of Chapter 13 bankruptcy. But you should gain approval from your court-appointed trustee as soon as possible because it involves a decent amount of paperwork.
You’ll have to file a Motion to Sell if you want to sell your home while in Chapter 13. This includes a house appraisal or other documentation to determine or verify your home’s value as well as a proposal for distributing the proceeds of the sale. If the trustee and Court find your motion reasonable, your proposal to sell will usually be approved.
So don’t wait until hours or days before closing to start the process of getting approval for the sale from your Chapter 13 trustee and your Bankruptcy Judge.
In Atlanta it could take, on average, 30 to 45 days to collect the information needed to draft a Motion to Sell, give the trustee and creditors an opportunity to object, and negotiate with the trustee. So be sure to give yourself enough time to get the required Order from the judge to proceed with the closing.
When can I sell my house in Chapter 7?
It’s difficult to sell your home in Chapter 7 bankruptcy. But if your Chapter 7 case is closed, you can sell your home any time. There’s no waiting period once your debts are discharged. Typically, however, people don’t get to keep their home in Chapter 7.
During a Chapter 7 bankruptcy case, you get to retain up to $23,675 of equity in your home (this is called the exemption amount). So if your equity exceeds this limit, then your house will probably be sold to pay your debt and you’ll receive the $23,675 exemption amount.
But if you have less than $23,675 (or $47,350 if you’re married) of equity in your home, the trustee may decide NOT to sell your home. That’s because there wouldn’t be any proceeds left to pay off your debts after applying the exemption amount. But that doesn’t mean your lender won’t foreclose on your property. You’re simply just stalling the sale.
Example Scenario
Let’s say your Chapter 7 bankruptcy case was filed and discharged. But you didn’t have enough equity in your home so the trustee didn’t sell your house. You may then consider selling your home. If you may make some money on the sale and need some extra cash, then selling your home to a cash buyer is a great idea. And even if you don’t foresee making any money on your property compared to what you’ve already put into it, selling your home is still an option if you need money ASAP to get your finances in order.
Otherwise, you may consider not paying your mortgage and staying in the premises of your home until your mortgage company forecloses. Bankruptcy Attorney Lynda Wesley confirms you can do so if you didn’t sign a Reaffirmation Agreement. Another option is a Deed in Lieu of Foreclosure.
Related Article: How to Avoid Foreclosure in Georgia
Selling Your Home Fast During Bankruptcy
What are your options for selling your home during Chapter 13 bankruptcy?
It’s well documented that buyers are known to get a bit pushy if they discover you’re in a bankruptcy case during negotiations. So it’s best to be upfront and transparent with potential buyers so it’s easier and less stressful on everyone.
You should also consider seeing if you can get a better offer from any home-buying companies. Some cash buyers, like JWS Acquisitions, pride themselves on building a long-term portfolio and offering fair and transparent market prices.
Get a Free Cash Offer on Your Home
If you want to see how much cash you can get for your house, you can get a free cash offer on your home from us today. It doesn’t cost a dime and there’s no obligation to follow through with anything.
We also don’t care whether you’re in bankruptcy or not. It doesn’t make a difference to us either way. We still don’t charge commissions, service fees, closing costs, or hidden fees. And you still won’t have to pay for a real estate agent or lawyer.
Either way, we use a combination of past market data, predictive market analytics, and careful analysis to determine our cash offer—just like we do for each and every offer we give sellers in the Atlanta area.
We’re more than happy to discuss in detail exactly how we calculate your home value.
