Filing for bankruptcy is a great way to get rid of your debts. However, when you file for bankruptcy, everything you own becomes a part of your bankruptcy estate, says Los Angeles based bankruptcy law firm Recovery Law Group. Being part of your bankruptcy estate ensures that the property is safe from foreclosure. However, just like creditors cannot foreclose on the property, you also cannot sell the house without the court’s permission.
In the case of chapter 7 bankruptcy, selling home can be a bit difficult. You are required to convince the court that the sale won’t deny any creditor their dues. The trustee needs to have the court’s approval to sell the home so that they can distribute the money among creditors. In the case of chapter 13 bankruptcy, the debtor can sell their home if it doesn’t cause any financial loss to the mortgage lender.
If you have filed for bankruptcy and wish to sell your home, you need to file in court a Motion to Sell Real Property. The motion needs to be accompanied with detailed information pertaining to the property like selling price, as well as names of creditors with a lien on the property. Apart from this, you also need to provide a detailed report on how the money generated will be used.
In case the bankruptcy trustee believes that selling of the debtor’s home would be able to cater to the creditor’s requirements, then they are also required to submit the above-mentioned details. Apart from this, the bankruptcy trustee is also required to provide information about bankruptcy as well as how the sale proceeds will be distributed among creditors.
Bankruptcy exemptions are available for debtors to protect their property when they file for bankruptcy. If homestead exemptions cover the home’s value entirely or even partially, the trustee might not be able to sell the home. Investment properties, on the other hand, do not get the same exemption as residential homes, since they were not the primary residence of the debtor and were purchased to provide additional income and profit as a result of the appreciation of property. Debtors who file for chapter 7 bankruptcy cannot protect their investment homes from becoming a part of their bankruptcy estate.
People filing for bankruptcy can choose from either federal or state bankruptcy exemptions to protect their assets or equity in them. A skilled bankruptcy lawyer can help you decide which set of exemptions will help protect most of your property. If you haven’t hired a bankruptcy lawyer, you can seek consultation by calling at 888-297-6023.