Bankruptcy and Selling Your House - What Happens?
Bankruptcy and homeownership intersect in ways that many people find confusing. Whether you can sell your home during bankruptcy, and what happens to the proceeds, depends on the type of bankruptcy you filed and the status of your case. Here is a clear overview.
Chapter 7 vs. Chapter 13 Bankruptcy
In Chapter 7 bankruptcy (liquidation), a trustee is appointed to sell non-exempt assets to pay creditors. Your home may or may not be exempt depending on your equity and New York's homestead exemption (currently $170,825 for most of Onondaga County). If your equity exceeds the exemption, the trustee may sell the home to pay creditors. If your equity is within the exemption, you may be able to keep the home.
In Chapter 13 bankruptcy (reorganization), you keep your assets and repay creditors through a 3–5 year payment plan. You can generally keep your home as long as you continue making mortgage payments and stay current on your plan payments.
Selling During Chapter 7
If you want to sell your home during a Chapter 7 case, you must obtain court approval (called a "motion to sell"). The trustee must also approve the sale. Proceeds above the homestead exemption go to the bankruptcy estate to pay creditors. This process requires a bankruptcy attorney and typically takes several weeks to complete.
Selling During Chapter 13
Selling your home during a Chapter 13 case also requires court approval. The proceeds are used to pay off the mortgage and any other liens, and any remaining equity above the homestead exemption may need to be paid into the bankruptcy plan. Again, a bankruptcy attorney is essential.
Selling Before Filing Bankruptcy
If you are considering both selling your home and filing bankruptcy, the timing matters significantly. Selling before filing can affect your bankruptcy eligibility and the treatment of the proceeds. Consult a bankruptcy attorney before making any decisions.
How ReliefRealty Can Help
ReliefRealty has experience working with homeowners in bankruptcy situations. We can move quickly once court approval is obtained, and we work with bankruptcy attorneys to ensure the transaction is properly structured. If you are in bankruptcy and considering selling your home in Onondaga County, contact us for a confidential consultation.
