Can You Sell Your House After Bankruptcy?

Some people are afraid to file bankruptcy for fear of losing their home. The way every state deals with this concern varies. Depending on the amount you have paid and the value of your property you may opt to keep it and later on decide what to do with the property.

Selling after Bankruptcy

In general, you get to keep all assets and property that are exempted in bankruptcy. These exempted assets cannot be sold by the trustee to pay back your debt. As such, you are allowed to do whatever you want with them.

The majority of states will permit an exclusion of a specific amount of the property equity from the bankruptcy assets. The exclusion, nevertheless, varies from one state to another. If the exempted amount is greater than the home equity, then you may retain the property. There will be no problem in the disposal of the home right after receiving a discharge order.

To know more about exempt and nonexempt property, including what exemption laws apply in your case, discuss your situation with an experienced Bankruptcy lawyer San Antonio.

Selling before Bankruptcy

Selling your house just before declaring a bankruptcy should be avoided. You cannot be certain that the payment for the house will not be used by the bankruptcy trustee to repay your creditors. Even if this is fine with you, if you sold the house to someone you have a personal relationship with and at a very affordable price, the trustee may seek to reverse the sale. Generally, the transfer or sale of exempt property is allowed. Transferring or selling nonexempt property, however, can get you into trouble.

Selling after Filing Bankruptcy

It is often recommended not to sell a house prior to a discharge, like before filing for bankruptcy and after declaring bankruptcy. Upon bankruptcy filing under Chapter 7, you technically hand over the control of your assets and property to a bankruptcy trustee. To be able to sell off your house you must get the consent of the court. In Chapter 13 bankruptcy, the trustee will likely use the money you get to repay your other creditors.

Additional Considerations

If the house you want to sell is worth less than your mortgage loan, also referred to as negative equity, you should not agree to pay the mortgage after a discharge; or else, you need to finance the difference between the amount of debt and the income of the transaction. Without a re-affirmation of debt, you can wipe out your outstanding balance.

One other thing to take into consideration before selling a house is that in order to re-invest in another house or property, an eligibility to get a house loan is necessary. Often times though, an individual who obtained a bankruptcy discharge recently may need to wait some time before qualifying for a mortgage loan.

To learn more about prebankruptcy planning, and actions to avoid prior to bankruptcy, consult a  bankruptcy attorney in your area.

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Reaffirming a Debt in Bankruptcy

A debt reaffirmation agreement is an agreement made between the debtor and a creditor that prevents a debt discharge that would otherwise come about in the bankruptcy proceeding. There are many reasons why you may choose to reaffirm a debt, even if you can eliminate it through a bankruptcy discharge.

A very common reason to enter a debt reaffirmation agreement is to keep a property that serves as collateral for a debt, such as a house or a car. If you have some equity in the house or car you may be able to keep them in bankruptcy. In case there is no extra equity that can be used to repay creditors, the bankruptcy trustee will not be interested to liquidate a property.

A debt reaffirmation means that the loan will continually be paid and in return the creditor will not take the collateral of the loan. You may want to keep paying a loan if you have a guarantor or co-signer who must pay the debt if you don’t. If your lender or creditor is related to you, you may also want to reaffirm a debt. It is common for debtors to feel that repaying their creditors, especially those who are related to them, is the proper thing to do regardless of the circumstances.

Lastly, you may want to reaffirm a debt because your creditor claims that the debt is not dischargeable. This might be the case where your creditor claims that the debtor committed fraud in order to get the loan. That’s why instead of taking a chance on retaining the full amount of debt after the bankruptcy case, the debt can be reaffirmed partially to work out the dispute.

Reaffirmation agreements must comply with rigid regulations and they usually involve obtaining the bankruptcy court’s approval. The time frame to reaffirm a debt is constrained. A debt has to be reaffirmed before a discharge is granted and the case closes. There is a 2-month period from the date of signing the reaffirmation or until the discharge, whichever requires lesser time, to withdraw from a reaffirmation deal.

There is a standard procedure for reaffirming a debt. The agreement must be filed with the bankruptcy court. The approval of the court will not be required if your Bankruptcy Attorney San Antonio has arranged the agreement and submitted supporting documents guaranteeing that the reaffirmation is voluntary, does not lead to undue hardship on you and your dependents, and you have adequate income to make the payments.

If you do not have a lawyer, filing a motion for approval is mandatory. The bankruptcy court will evaluate your motion and the reaffirmation agreement at a discharge hearing. Usually, the court makes the decision whether to allow the agreement during that time.

The bankruptcy law clearly states that the debt reaffirmation guidelines do not prohibit any voluntary repayment. Voluntary repayment simply means that a debt would be paid despite the fact that you are no longer legally responsible to do so. You can pay back a loan from a creditor if you feel morally responsible to do it. This will not require a court’s approval.