For most people, their home is their biggest purchase and most valuable asset, so it comes as no surprise that it is also the biggest concern when considering filing for bankruptcy. If you are in this position, then you may be considering selling your house, even though you may not want to actually leave it. It’s just that the idea of having it sold out from under you by a bankruptcy trustee feels unacceptable.  Though it is possible to sell your home before filing for bankruptcy, it is not recommended, and if you do so you need to make sure that you go about it in the right way to avoid being accused of trying to evade your debtors.

Though the law allows you to sell your property before a bankruptcy, if the sale occurs too close to your filing it is likely to be carefully reviewed to see whether you sold it in order to avoid paying creditors. If you can show that you sold property in order to pay for necessities like medical care or food or clothing for your children, that is permitted. You are also permitted to sell real estate while in the midst of a bankruptcy proceeding but doing so requires permission from the bankruptcy court.

If you are planning on filing a Chapter 7 bankruptcy and you are concerned about the trustee selling your house to pay off your creditors, be aware that this usually only happens when there is substantial equity in the home – otherwise it is not considered worth the time or effort to satisfy the creditors. But you need to wait until the trustee makes this decision before you move forward to sell the house yourself. This confirmation comes in the form of a Notice of Abandonment of Property. Once this has been filed with the court you will be free to either keep the house or sell it.  In a Chapter 13 bankruptcy, the sale of your home would never be considered by the court.

It is generally easier to sell your home after your bankruptcy is over and all of your debts have been discharged. This voids the need for a court order, but keep in mind that if your bankruptcy was filed under Chapter 13, proceeds from the sale over $25,250 will need to be used to pay off the creditors that were included in your bankruptcy plan.

For guidance on moving forward with a bankruptcy filing, contact our experienced attorneys today to set up a time to discuss your situation.