Can I Sell My House After Filing For Bankruptcy?

Yes, but there are considerations. In Chapter 7, if you wait until after your Section 341 Meeting of Creditors and the bankruptcy trustee files their Report of No Distribution, you have every right to sell your property. It was disclosed in the bankruptcy filing, the trustee had an opportunity to investigate and liquidate the property for the benefit of the creditors, they elected not to do so, now it is your property to do with as you please again. If, for whatever reason, you need to sell the property prior to the trustee filing their Report of No Distribution, then you must file a motion with the bankruptcy court seeking to approve the sale with notice of the motion properly provided to the trustee. The court will determine whether the sale is reasonable and allowed to proceed.

Be careful, however, because if the sale price is substantially higher than the value of the property that you listed in the bankruptcy petition, bad things can happen. The trustee can seek to withdraw their Report of No Distribution and take the non-exempt sale proceeds for your creditors. There may also be an implication that you committed bankruptcy fraud by intentionally undervaluing the property in your bankruptcy petition. This could lead to the U.S. Trustee seeking revocation of your bankruptcy discharge or even seeking criminal charges for bankruptcy fraud against you. If you do seek to sell your home and get a higher price than what was listed in your petition, you need to notify your attorney immediately and get your bankruptcy petition amended to reflect the sale price. This immediate disclosure should substantially protect you from accusations of fraud.

The rules governing Chapter 13 are slightly different and vary by jurisdiction. In most courts, you are required to file a motion to approve the sale of any asset that was included in your bankruptcy petition. Some do not require a motion once the Chapter 13 plan has been confirmed, but they expect you to follow the essence of the Chapter 13 plan. What that means is that if your Chapter 13 plan was calculated based on the equity you have in your home, then the court will expect that you pay the same amount to the trustee from the proceeds of the sale. The trustee may argue for more to be paid based on any increase in value that the home accrued while you have been in Chapter 13. You are entitled to your homestead exemption, assuming it was properly claimed, so that amount can be kept from the sale proceeds, but you want to ensure that you can easily trace this amount. It is usually recommended that sale proceeds that pay off the exemption be placed into a separate bank account. Having an experienced bankruptcy attorney advising you through this process will ensure that you follow the jurisdiction’s rules and maximize the amount of the sale proceeds that you are allowed to keep.

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