How To Sell Your Home During A Chapter 13

The first thing you need to be aware of is that you have an ongoing obligation through you Chapter 13 to report any “change of circumstance” this includes acquiring assets of value greater thant $4,999.00, significant increases in income, and significant decreases in expenses.

With that being said, the sale of real estate creates several issues for a case.  1) You need court permission to conduct the transfer of any asset during your bankruptcy including your real estate. 2) You may have to pay any proceeds from the sale into your Chapter 13 plan. 3) The change in housing expense if it results in a reduction could mean an increase to your monthly Chapter 13 plan.  Before you speak to a realtor you need to run the idea by your attorney first to insure no unforeseen consequense.

How To Get Started

After discussing the merits of selling your property with your attorney, the first step is to find a buyer and procure a contract of sale.  Your duty as part of advertising your property to for sale is to make sure your agent and the buyer knows that any sale is “contingent on the bankruptcy judge approving the transaction”.  You also need to inform your agent and the buyer that the process of approval could take 60 to 90 days from the time you provide the contract of sale to your attorney.   If any of the parties in a huge hurry then you can advise them to seek separate counsel to rush the matter before the judge.  We cannot represent them because we represent you.  We will consider “rushing” your matter if you qualify for such a consideration in the court’s eyes.  Being eager, waiting to the last minute, worrying about losing a contract are not legitimate rush reasons.  If you notify the buyer properly in advance a rush is generally not required.

To be clear, you do not need court permission to list the property but should be aware that you are entering into a contract with your agent and the buyer that is not covered by your bankruptcy automatic stay. To insure you are not liable to any vulnerability from that action you should consult a real estate attorney in advance.

Once you have a signed contract, you will provide it to our office by sending it to your attorney.  The contract must be signed and must be accompanied by a HUD1 statement outlining what costs and fees will be paid at closing.

Once we have received the contract we will draft the Motion to Sell and schedule the hearing before the judge if required.  In the process of getting the court’s approval we will also interact with the trustee to determine the status of any proceeds from the sale.   

You will not be able to “close” on the contract until the judge signs an order approving the Motion to Sell.