It is possible to sell a house after filing for bankruptcy -- but don't expect to keep all of the profits for your personal use. The federal bankruptcy court will closely control all of your debts and assets once you file for bankruptcy, including a sale of your house. The bankruptcy court may rule that creditors should receive at least some of the profits from a sale of your house after bankruptcy.
Considerations
This issue is complex and requires careful discussion with a bankruptcy attorney. Bankrate.com suggests that it is better to sell the home before bankruptcy, keep all the money from the sale and then use Chapter 7 bankruptcy to eliminate all unsecured debt such as credit cards -- if you qualify for Chapter 7. Individual states have different laws about protecting equity in real estate during bankruptcy. That means, depending on the state, you could sell your house in bankruptcy and keep some or all of the proceeds, depending on the law and the amount of equity in your home. However, the law may require you to use the proceeds to purchase another house. That could cause problems because there's no guarantee that someone in bankruptcy will qualify for a new mortgage for several years.
Chapter 7 Bankruptcy
Chapter 7 and Chapter 13 are two forms of personal bankruptcy. A primary function of Chapter 7 is to liquidate assets to pay creditors. Usually, debtors can keep their primary residence in Chapter 7 because of exemptions. Exemptions protect certain property from liquidation. However, a debtor wishing to sell his house during Chapter 7 could do so. Chapter 7 is the fastest form of bankruptcy, lasting only three or four months. Debtors considering selling their home during Chapter 7 should postpone the sale until after the bankruptcy is completed or discharged.
Chapter 13 Banruptcy
Chapter 13 bankruptcy lasts far longer than Chapter 7. It takes three to five years to complete Chapter 13 because of a mandatory payment plan. Chapter 13 participants are given a budget for reasonable living expenses, with all other money sent to creditors as part of the payment plan. Many people filing for Chapter 13 are trying to keep their homes and protect them from foreclosure. Chapter 13 also allows for the voluntary sale of real estate, but the court may order contribution of least a portion of the profits to the payment plan. That means waiting until after the bankruptcy to sell it advisable in Chapter 13 as well.
Foreclosure Avoidance
Some people may choose to sell their homes in bankruptcy to avoid foreclosure on the property. For them, losing profits from the sale is not a consideration because they will lose all equity in foreclosure anyway. Foreclosure remains on credit reports for seven years and bankruptcy for a minimum of 10 years. Some people in bankruptcy decide that they simply cannot afford their mortgage payments and try to sell to minimize damage to their credit report.
0 comments:
Post a Comment