Can You Sell Your Home While You Have Filed Bankruptcy?
- United States federal law controls bankruptcy proceedings. What this means is that the rules and procedures for anyone filing bankruptcy are the same throughout the country, regardless of the state in which you file. The only exception to this is that state laws will determine what exemptions, if any, you are entitled to claim in your petition. The U.S. Bankruptcy Code provides a number of chapters under which you may file a petition for bankruptcy. The two most common chapters used by individual debtors are Chapters 7 and 13. A Chapter 7 is generally used by low-income debtors with few assets. A Chapter 13 is typically used when a debtor has non-exempt property to protect or has a significant income.
- Once you file for protection in bankruptcy court, a bankruptcy estate is created. The bankruptcy estate consists of all assets you own at the time of filing. Under all but a Chapter 7 case, it also includes most income you earn while the case is pending. The bankruptcy court controls the estate. The bankruptcy court's jurisdiction trumps all other claims to anything that is part of the estate.
- Immediately upon the filing of a petition for bankruptcy, the court issues an automatic stay. The automatic stay prevents all creditors from initiating or continuing any collection efforts. If, for example, your home was in foreclosure, the automatic stay will halt those proceedings. A creditor may, however, file a motion for relief from the automatic stay. If granted, the creditor may proceed to collect on the debt. Although a court may grant relief from an automatic stay to your lender, this only means that the lender may proceed to foreclose on the property. As the debtor, you are not allowed to sell the home based on the court granting relief from an automatic stay.
- You may petition the court for permission to sell your home during a bankruptcy proceeding by filing a motion to sell with the court. Because the court controls all assets of the estate until the bankruptcy is discharged, court approval is required to sell any property of the estate. The court will have to approve the terms of the sale and will determine what happens to the proceeds of the sale. Consider consulting with an attorney before you file bankruptcy or seek permission to sell property during a bankruptcy.