Can You Sell Your House While in Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a debt consolidation bankruptcy where you reorganize your debt.  One of the primary benefits of a Chapter 13 bankruptcy, as opposed to a Chapter 7 bankruptcy, is that a Chapter 13 often allows you to keep and/or protect assets that you might lose in Chapter 7.  For example, if you have more equity in your home than you can protect, Chapter 13 bankruptcy allows you a way to protect that equity and still keep your home.  I have personally helped countless families in Knoxville and the surrounding counties protect their homes by filing Chapter 13 bankruptcy.  But, what happens if you need to move, downsize or for some other reason need to sell your home?  I have been asked more than once: Can I sell my house if I am in Chapter 13 bankruptcy?  The answer is yes.

Selling Your Home While in Chapter 13

Your bankruptcy attorney will assist you with the necessary steps to sell the property, as they relate to the Bankruptcy Court and the Chapter 13 Trustee.  Generally, you choose the realtor you want to hire.  The realtor must then be approved and hired through the Bankruptcy Court.  While the Bankruptcy Court doesn’t care which realtor you hire, the Court does want to make sure the agreement between you and the realtor is fair to all parties.  For example, the Court wants to make sure the realtor isn’t charging a real estate commission that is too high for the market or the transaction.  Once you receive purchase contract on your house, your attorney will submit that contract to the Bankruptcy Court for its approval.  Any net proceeds, after paying all mortgages and liens and paying you your homestead exemption are paid into your Chapter 13 bankruptcy and distributed to your creditors.

If you have a house worth more than you owe, chapter 13 bankruptcy is a great tool to help you protect your assets while reorganizing your other debt.  Remember that you will need a skilled and knowledgeable bankruptcy attorney that knows how to protect your assets.  Because everyone’s financial situation is different, all of the Bond & Botes attorneys in our Tennessee, Mississippi & Alabama offices offer a free, one on one, no-obligation consultation.  The purpose of the initial consultation is to understand your unique situation and develop a personalized plan to meet your needs.