Selling your house during bankruptcy
It can be done, but not on your own. Here's who has to approve a sale in Chapter 7 and Chapter 13.
No obligation. No pressure. Takes about 2 minutes.
The short answer
You can sometimes sell a house during bankruptcy, but you'll need approval. Filing creates a bankruptcy estate that includes your home, and selling estate property outside the ordinary course of business requires notice and a hearing in the bankruptcy court. In Chapter 7 the trustee makes that call; in Chapter 13 the power to sell is yours, but you still go through the court. Talk to your bankruptcy attorney before you sign any contract.
Step by step
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1
The house belongs to the estate
When you file, the bankruptcy estate technically becomes the temporary legal owner of your property, including the house. That's why you can't list or sell it the usual way.
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2
Chapter 7: the trustee's decision
The trustee's job is to sell nonexempt assets for the benefit of creditors, generally property that is free of liens or worth more than what's owed on it. Exemptions under federal or state law may protect some property.
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3
Chapter 13: you sell, the court approves
In Chapter 13, the law gives you, not the trustee, the power to sell estate property. A sale outside the ordinary course still needs notice and a hearing, so your attorney asks the court for approval.
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4
The stay pauses collection
Filing automatically stops most collection actions, including acts to enforce liens against estate property. It buys time, but the mortgage still has to be handled in the case or paid off at closing.
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5
Plan the timing
Closing waits on the court's approval, so tell any buyer about the bankruptcy up front and build that time in.
Sources: U.S. Courts: Chapter 7 bankruptcy basics · U.S. Courts: Chapter 13 bankruptcy basics · 11 U.S.C. § 362 (automatic stay) · 11 U.S.C. § 363 (sale of estate property) · 11 U.S.C. § 1303 (Chapter 13 debtor's powers)
This page explains general bankruptcy rules. It isn't legal advice. Every case is different, so talk to your bankruptcy attorney before you take any step toward selling.
Cash offer vs listing
Example: a $250,000 home
| Offer | $205,000 |
|---|---|
| Repairs | $0 |
| Commissions | $0 |
| Closing costs | $0 |
| You walk away with | $205,000 |
| In 7 to 14 days | |
| Sale price | $250,000 |
|---|---|
| Repairs | about $8,000 |
| Commissions | about $13,800 |
| Closing and holding | about $6,000 |
| You walk away with | about $222,200 |
| In 60 to 90 days | |
Example only. Your numbers depend on your home and market.
If your attorney says a sale makes sense, we'll show you a cash offer next to what listing could net so you can compare them together.
Frequently asked questions
Can I sell my house while in Chapter 13?
Often, with court approval. You hold the power to sell in Chapter 13, but a sale outside the ordinary course requires notice and a hearing.
Does filing bankruptcy stop a foreclosure?
Filing automatically stays most collection actions, including foreclosure, for the time being. Chapter 13 can also let you catch up on missed mortgage payments over time.
Do I need a lawyer to sell during bankruptcy?
It's wise to have one. Court approval, exemptions and liens all affect whether and how you can sell.
Who are you?
We are real estate investors based in Baltimore, helping homeowners since 2016. We buy houses directly for cash. We are not a licensed real estate brokerage and do not list homes ourselves; if listing could get you more, we show you the math so you can choose.