Can I sell my house for cash while in Chapter 7/Chapter 13 bankruptcy?

Yes, it’s possible to sell your house for cash while you’re in Chapter 7 or Chapter 13 bankruptcy, but the process and implications differ significantly between the two types of bankruptcy.

Chapter 7 Bankruptcy:

In Chapter 7, also known as liquidation bankruptcy, a trustee is appointed to oversee your assets, including your house, to liquidate them and pay off your creditors. Here’s how selling your house for cash works under Chapter 7:

  • Trustee’s Role: The trustee has the authority to sell your non-exempt property to pay your debts. If you want to sell your house for cash, the trustee will likely be involved in the process.
  • Exemptions: If your equity in the house is fully covered by a bankruptcy exemption, you might be able to keep your home. However, if you still wish to sell, you’ll need the trustee’s approval.
  • Court Approval: Any sale of property during Chapter 7 requires court approval. You or the trustee must file a motion to sell the property with the bankruptcy court, and a judge will decide whether the sale can proceed.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcy is a reorganization bankruptcy, where you follow a court-approved repayment plan that lasts 3-5 years. Selling your house during Chapter 13 involves these steps:

  • Plan Modification: Selling your home while in Chapter 13 typically requires modifying your repayment plan, especially if the sale impacts your ability to make plan payments.
  • Court Approval: Similar to Chapter 7, you’ll need the bankruptcy court’s permission to sell your home. This involves filing a motion and justifying the sale, showing that it won’t adversely affect your repayment plan.
  • Proceeds: The proceeds from the sale may need to be directed towards your repayment plan, depending on your case’s specifics and the court’s decision.

Common Considerations:

  • Legal Counsel: In both types of bankruptcy, it’s essential to work closely with your bankruptcy attorney to understand the implications of selling your house for cash and to navigate the legal requirements effectively.
  • Impact on Bankruptcy: The sale of your house during bankruptcy can significantly impact your case, including the potential for altering your repayment plan in Chapter 13 or affecting the assets available for liquidation in Chapter 7.
  • Transparency and Compliance: Full transparency with the court and your trustee is crucial. All aspects of the sale, including the buyer, sale price, and distribution of proceeds, must comply with bankruptcy laws and court orders.

Selling your house for cash during bankruptcy is complex and requires careful consideration of legal and financial factors. Always consult with your bankruptcy attorney to guide you through this process and ensure that your actions align with your bankruptcy strategy and legal obligations.