Last Updated on January, 2025
If you’re in Chapter 13 bankruptcy and thinking, “Can I sell my house while in a Chapter 13 bankruptcy?”
The answer is yes!
Selling a house during Chapter 13 bankruptcy is possible, but it requires following a specific process. Since your property is part of the bankruptcy estate and under the watchful eye of the bankruptcy court, there are a few key steps to navigate.
Let’s break down the process so you know exactly what to expect.
Quick Summary
- Selling your house during Chapter 13 bankruptcy requires court approval since the property is part of the bankruptcy estate. A motion to sell must be filed, detailing the sale agreement, buyer information, and how proceeds will be allocated. The court ensures that the sale aligns with your repayment plan and benefits creditors.
- Your bankruptcy attorney plays a crucial role in navigating the process, from preparing paperwork to coordinating with the bankruptcy trustee. The trustee informs creditors about the sale, who may object if they find the terms unsatisfactory. Clear communication with your attorney and trustee is essential for a smooth process
- After covering the mortgage and closing costs, sale proceeds typically go to the bankruptcy trustee to reduce debts in your repayment plan. If the proceeds are substantial, it might expedite the completion of your repayment plan and lead to an early bankruptcy discharge
Here’s What You Should Do to House While in a Chapter 13 Bankruptcy
Step 1: Start with Your Bankruptcy Attorney
Selling a house in Chapter 13 is not your typical sale. First, reach out to your bankruptcy attorney. They’ll guide you through filing the appropriate motions and ensure all the right paperwork, like the sale agreement and proposed sale details, is ready for submission to the bankruptcy court.
The court will need specifics about the home’s final sale price, your buyer, and the fair market value of your property.
Your bankruptcy lawyer will work with the bankruptcy trustee to keep the court and creditors informed and to make sure the sale fits within your repayment plan. Getting court approval up front will save you headaches later.
Step 2: Why Court Approval is Essential
In Chapter 13 bankruptcy, your house is part of the bankruptcy estate. Any major financial decisions related to your property, including selling, need court’s approval. This is to ensure all sale proceeds contribute to your bankruptcy plan and benefit your creditors.
Your bankruptcy attorney will help you file a motion to sell, which will include:
- A snapshot of the sale agreement and proposed sale price.
- Information about the buyer so the bankruptcy judge can confirm the sale is at market value.
- Details on how the proceeds will be used. Typically, they go to the repayment plan to help cover unsecured debts and other obligations in your bankruptcy filing.
Step 3: Notifying Creditors
Once your bankruptcy lawyer files the motion to sell, the bankruptcy trustee notifies your creditors. They get a chance to review the sale and, if needed, object. Creditors are interested in seeing that the net proceeds from the sale are used effectively in the repayment plan.
If there’s enough money after covering the mortgage lender and closing cost, it often goes toward reducing your debts.
Step 4: Court Hearing and Approval
Once the motion is filed, the bankruptcy court schedules a hearing. During this hearing, the judge will review all the details and consider any objections raised by creditors.
If everything looks good, the court approves the sale, and you’re clear to move forward with closing.
Quick tip: Don’t set a closing date until the court approves. This way, you can avoid potential delays if the bankruptcy judge needs more information.
Step 5: Closing the Sale and Handling Proceeds
With court permission granted, you’re ready to close the sale. But here’s the twist: the net proceeds—after paying the mortgage lender and covering closing costs, typically go to the bankruptcy trustee.
These proceeds are then used to pay down debts as laid out in your bankruptcy plan.
In some cases, if the sale proceeds are significant, you might be able to finish your repayment plan sooner.
This could lead to an early discharge of your bankruptcy filing. Your bankruptcy attorney will work with the court and trustee to make any adjustments necessary.
Tips for a Smooth Process
If this seems like a lot to keep track of, here are some tips to help make the entire process as smooth as possible:
- Stay Connected: Keep your bankruptcy attorney, real estate broker, and trustee updated at each step. Clear communication can prevent any misunderstandings or delays.
- Free Consultation: Many bankruptcy attorneys offer a free consultation to help you understand what to expect. Don’t hesitate to ask questions and get the expert advice you need.
- Timing Matters: Avoid setting specific dates for closing until you have court approval. Selling a house in Chapter 13 requires patience and a good bit of planning.
- Plan for All Costs: Be prepared for closing costs and any outstanding mortgage payments to come out of the sale.
Considering a Dismissal Before Selling?
Sometimes, homeowners consider dismissing their Chapter 13 bankruptcy case before selling their house. Doing so could speed up the sale, as it would no longer require court permission.
However, remember that dismissing Chapter 13 also means losing important protections, like the ability to stop foreclosure or avoid creditor collections.
If you’re weighing this option, your bankruptcy attorney can help you understand the potential pros and cons based on your situation.
Looking to Sell in Tulsa? We’re Here for You!
If you’re in the Tulsa area and thinking about selling your house during Chapter 13 bankruptcy, we’re here to make it easier. We buy houses for cash, which can simplify the process and help you close quickly.
Give us a call, there’s no obligation. A cash sale can help you avoid the usual steps of listing, negotiating, and waiting, especially when you’re in chapter 13 bankruptcy.
Useful guides:
Final Thoughts
Selling a house during Chapter 13 bankruptcy may feel daunting, but with a solid plan and the right guidance, it’s absolutely manageable. Working closely with a reliable bankruptcy attorney, keeping your creditors informed, and securing court approval are all critical steps.
Follow this guide, stay organized, and before you know it, you’ll be on your way to a successful sale and a fresh start.
