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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