Can I Sell My Home During a Personal Bankruptcy?

The decision to declare bankruptcy is a significant one. It’s a decision that not only affects your financial position but also your assets, including your home. One of the most frequent queries from those considering bankruptcy is, “Can I sell my home during a personal bankruptcy?” Here, we delve into this complex issue.

Evaluating Your Situation

Before you proceed with bankruptcy, it’s crucial to evaluate your situation. Two key questions to ask yourself are:

  1. Do I desire to retain my home?
  2. Can I financially support the maintenance of my home?

For some individuals, bankruptcy is seen as an opportunity for a fresh start. They might choose to let go of their house, either because they no longer want it, or the maintenance is too burdensome. Others may decide to keep their homes, either because it’s cheaper than renting or they hope to sell it in the future for a profit. Regardless of your decision, it’s vital that you carefully review this before filing for bankruptcy.

Consequences of Selling Post-Bankruptcy

The crux of the matter lies in understanding that once you file for bankruptcy, you cannot sell your property at your discretion. When you declare bankruptcy, you agree to assign your assets, including your home, to a trustee. This means you lose control over the sale of your home. If you wish to sell your home post-bankruptcy, you must first consult with your trustee. Your trustee will need information such as:

  1. The potential sale price of the house
  2. The mortgage payout
  3. The closing costs

If the sale of your home could generate significant funds for your creditors (in other words, if it has equity), your trustee will likely collaborate with you, your lawyer, and real estate agent to list and sell the house. However, remember that any profit from the sale will go into your bankruptcy fund, and you will not receive anything.

The Trustee’s Perspective

Bankruptcy’s primary goal is to maximize the funds paid to your creditors. If the sale of your house does not generate funds for the bankruptcy, your trustee may not be willing to sell it. Why would they sell a house that provides no benefit to the creditors? If you cannot sell the house and cover all associated costs, your trustee will not agree to list the house for sale (for both your benefit and your creditors’). You might have to wait until you are discharged from bankruptcy before selling your house.

Making the Decision

This decision needs careful consideration before you file for bankruptcy. Once made, you must stick with it until your bankruptcy is completed. If you need assistance with this decision or need to review your situation with a bankruptcy expert, contact a local trustee in bankruptcy to book a free consultation. They can help you crunch the numbers and decide whether to sell your home before filing, or if you need to sell at all. Remember, it’s a significant decision, but you’re not alone, and you have options.

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