In this article, we’ll discuss the important topic of: “Can You Sell Your House After Filing Chapter 7?”
Once you have filed a case of bankruptcy under chapter 7, your properties are now under the court’s jurisdiction, and the court will decide what needs to be done with it. The creditors do not have any right to foreclose on the property, as an immediate stay protects it. You will not be able to sell your house either, without any permission from the court. The court will appoint trustees who will look after the property, have every right to sell, and pay back the debts. But there are exceptions.
In this article, we will discuss the exception to selling a house during bankruptcy chapter 7.
Can You Sell Your House After Filing Chapter 7?
In each case of Chapter 7, bankruptcy is treated differently. However, in all cases, the court appoints trustees who decide what needs to be done for the debtor properties or assets. The only reason for a trustee to sell properties is to pay the creditors and reduce the debt amount. The trustees consider those assets only which can be sold.
But you can save some of your equity, which is protected under the law called a homestead exemption. If the total amount of your mortgage loan and the homestead exemption valuation is greater than the valuation of your house, the trustees usually do not sell it. Instead, they hand it over to you, and you can then sell it or hand over the property to the mortgage company.
If we wish to sell the property, let’s find out what procedure can be followed.
Procedure to sell your house after filing chapter 7
Below are the listed steps wherein you can sell your house-
Calculation of equity and homestead exemption
You need to find out the total valuation of your homestead exemption. There is a possibility that trustees can dissolve all assets if they are not declared as exemptions. Some states, like California, have two exemptions. Section 704, under the Civil Procedure Code, defines a more homestead exemption list. Check out how to calculate homestead exemption in details.
For instance, if you are single and disabled, you will receive up to $75,000, and if you are family, you will receive $100,000 of exemption. If you are elderly and disabled, you will receive more. This exemption amount is the value of your equity, which is your house’s total market value minus the mortgage loan you owe.
Meeting with Creditors
Now that you have calculated your homestead and equity value, you will have to attend a meeting with the trustees and creditors. This meeting may take up to 30-40 days from filing the bankruptcy case. You will have to present all the exemption claims.
If the mortgage value, home exemption, and trustee fees and selling cost overpowers the house’s total value, there is no equity you can give away, and the trustees can consider not selling the house.
Discussion with Trustees
If the trustees are convinced that your exemptions are correct and that there are no considerable assets with equity for him to sell and distribute amongst creditors, he can leave the assets. The Bankruptcy Law network reports that out of 100, 95 cases are like these. Now the trustees will file a “No Distribution report,” which will help discharge your bankruptcy.
Discharge from Bankruptcy
Now that the court discharges the case, your home is free from Chapter 7 bankruptcy. You can directly officially sell your house as an owner.
Sell the property
You will either have to list your property on any real estate website or appoint an agent to find a suitable buyer and negotiate the value.
Foreclosure process after chapter 7 discharge
Often, we receive a question that, can the property which has already been disclosed be foreclosed? The answer is yes. There can be two types of foreclosure in the United States.
One is judicial, and the other is non-judicial. In judicial foreclosure, to regain ownership of your house or property, the lenders can go through an entire court proceeding. However, in non-judicial, the lenders can sell a property at an auction and foreclose without taking approval from the court. It follows a state-specific foreclosure procedure.
One popular misconception is that bankruptcy provides the lenders a way to regain the property. They will have to follow either of the above mention methods. In a few cases, the lender might wait till your bankruptcy case is discharged. But a few lenders may not wait that long. They can immediately start doing the correct paperwork and request the bankruptcy court to keep the house or property out of protection so that they can continue with the sale.
The house that you own can fall under multiple exemptions while you are trying to sell. You must have all the valuation accurately prepared to save the house and sell the house. The lenders can foreclose the property in a few cases. We suggest you consult with your attorney to identify your properties and not lose it during bankruptcy correctly.
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