Chapter 13 bankruptcy offers powerful protections and benefits to debtors. It is a legal tool that can help people get control of their finances and get out of debt. Chapter 13 creates a three to five year repayment plan, giving the debtor the opportunity to reorganize and pay back a portion or all of their debt over time. While in Chapter 13 bankruptcy you must make an agreed upon monthly plan payment to the bankruptcy trustee.
Of course, three to five years is a lengthy commitment. What if you need to sell your house, or want to buy a house, during the course of your bankruptcy?
Can I Sell a House While in Chapter 13 Bankruptcy?
Yes, it is possible to sell a house while in Chapter 13 bankruptcy. It is important to understand that the sale will be subject to approval from the bankruptcy court.
You can enter into a listing agreement with a real estate agent or put your home on the market for sale yourself. When you enter into a sale contract, you must include in the contract that the sale will be subject to bankruptcy court approval.
Your bankruptcy attorney will need to file a Motion with the court for leave (permission) to sell. The court will then send notice to your creditors, who will be given 14 days to object to the sale. If no objections are timely filed, then the court will note no objections and then you may move forward with closing.
You will not receive money from the sale of your home at the time of closing. The proceeds of the sale will be forwarded to the bankruptcy trustee administering your case. The trustee will then distribute to you any proceeds that you are entitled to receive.
It is possible to sell a house while in Chapter 13 bankruptcy, though the process will require the assistance of your bankruptcy attorney. Remember that while you are in bankruptcy you do not want to take any actions that would be harmful to your case. It is critical that you follow the proper Court procedures and Bankruptcy rules to ensure that the sale is approved.
Can I Buy a House While in Chapter 13 Bankruptcy?
Yes, when certain conditions are met, it is possible to buy a house while in Chapter 13 bankruptcy. It is important to understand that you must ask the bankruptcy court permission to take on new debt while in Chapter 13.
You may be able to buy a house while in Chapter 13 bankruptcy when:
- You have been in Chapter 13 with consistently current payments for 12 months.
- You have no delinquent accounts.
- If you have at least a 620 beacon score you may qualify for a VA or FHA home loan.
- You will need court approval to incur new debt (to get a mortgage).
If you want to buy a house while in Chapter 13 you will need to contact a loan broker and work with him or her to secure a mortgage. Your loan broker will need a copy of your Chapter 13 payment history and other documents pertaining to your bankruptcy case. Your bankruptcy attorney will be able to provide the documents your loan broker needs.
Once your loan application is approved, you must secure a good faith estimate for what your total loan amount and monthly payment will be. At that point, it is important to take the proper steps to secure court approval. Contact your bankruptcy attorney to help with the process. You will need to provide your bankruptcy attorney with your recent pay stubs (and that of your spouse, if married) and be able to demonstrate that you can afford the estimated monthly mortgage payment.
To learn about buying a house after bankruptcy, read our article Can I Buy A House After Bankruptcy?
Find out more about Bankruptcy in our guide: All About Bankruptcy
Here at the Law Office of Barbara B. Braziel, we have over 35-years of bankruptcy experience. We are the premier bankruptcy law firm in Savannah, GA and we practice exclusively in bankruptcy law. We invite you to get to know us here and read about the clients we’ve helped here.
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