Can you sell your house while you are in an active Chapter 13?

The current real estate market is hotter than it has been in years.  As a consequence, we have recently seen some Chapter 13 clients who would like to cash in and sell their house.  Can you do it while you are in an active Chapter 13?  The answer is yes as long as you get permission from the court.

How do you get permission from the bankruptcy court to sell your house?

The first step is that your bankruptcy attorney will have to file a motion.  To file this motion, your case worker will need a copy of the sales contract.  Before you sign any contract for the sale of your house, make sure there is a provision that clearly states that the sale is subject to approval by the bankruptcy judge.  Please keep in mind that after the motion is filed, your bankruptcy attorney will apply to the court for additional attorneys fees for drafting and presenting the motion.

The trustee is going to want to know the relationship of the buyer to the debtor.  The reason for this is that a person in bankruptcy cannot just give away a valuable asset to a relative.  The transaction must be for fair market value.

A hearing will have to set with the bankruptcy court in order to give creditors time to object to the sale if they so choose.

As a general rule, do not set a closing date until the bankruptcy court has granted approval.

What happens to any extra money after the sale is completed?

The answer to this question depends on the amount of money that is left over.  In Georgia, a single filer can exempt a maximum of $21,500 of equity in their house.  A married couple can exempt a maximum of $43,000.00.

If I pay the extra money to the trustee, will my case end sooner?

The answer to this questions depends on whether or not your case is a composition plan.  In a composition plan, unsecured debts like medical bills and credit cards are being wiped out in the case.  Any extra money you pay to the trustee in a composition case will be applied towards debt that otherwise would have been wiped out.  If you are paying 100 percent of your debts, then any extra money paid to the trustee will shorten the time of your case.

Other Posts You Might Be Interested in Reading

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4. Stop Garnishment

5. Stop Foreclosure

6. Secrets from the debt collector’s playbook

 

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