There are many reasons why people choose to file for Chapter 13 Bankruptcy instead of Chapter 7. For one, if you had already filed for Chapter 7, you may not do so again for another eight years. Also, if you want to make up missed payments on a mortgage, you may only do so via Chapter 13. Whatever the reason, many homeowners that file for bankruptcy find themselves concerned with how they will make enough money to pay their debts over time. Moving to a smaller home/condo or renting an apartment might be a great plan for the budget, but the ultimate question most people find themselves asking is, “Can I sell my home while I’m under Chapter 13?”
Simple Answer: YES!
However, there are a few factors that go into play before you may sell your property:
- Both the court and the creditors must be informed of the home’s sale price and given written proof of the value of the property.
- Your attorney must notify all of your creditors before the property is sold.
- You must inform the court and the creditors how you plan to distribute all the proceeds from the sale.
- The final step is getting an approval from the bankruptcy court.
Before you consider anything (i.e. putting your house on the market), you should first consult with your lawyer. You need to make sure you have plenty of time to get an approval from the courts, as there is quite a bit of paperwork involved. You should also tell all prospective buyers about the bankruptcy situation. If you don’t, once it is revealed in the midst of negotiations, the buyer might get scared and back out of the deal.
It may take up to a month to receive an approval from the judge, so give yourself plenty of time to close the deal. If the proceeds cover all of your debts, your case will be discharged. However, if you need some of the money in order to purchase your new home, you and the judge must come to an agreement on the amount of money allocated to the bankruptcy trustee.