If you own a home when you file for bankruptcy, it becomes part of the bankruptcy estate, the property or assets you own. In October of 2022, there was a twenty-seven percent increase in chapter 13 bankruptcy filings over the previous year. Bankruptcies, including all chapters, total a seven percent increase overall, which correlates strongly with the seven percent increase in inflation. Many homeowners are overwhelmed by their debt. As financial issues due to circumstances beyond their control changed their ability to pay creditors, they find they have no option but to claim bankruptcy, which can stop a foreclosure on their primary residence.
Those with secured and unsecured debts totaling less than $2,750,00 are eligible for chapter 13. However, chapter 7 is a liquidation process in which the trustee sells your assets to pay debts based on your total income, debt, and ability to repay. Often, these homeowners want to sell their houses to solve at least some of their financial difficulties but wonder if it is possible during bankruptcy proceedings.
While the rules for the process may differ for the type of bankruptcy you file under, and many factors influence the final determination, for most homeowners, the short answer is yes. So read on as we explore how to sell your house during bankruptcy in Washington DC. Please note that this article is for informational purposes, not financial or legal advice.
Court Permission
If you are in the process of filing for bankruptcy in Washington DC and wish to sell your home, you’ll need to file a motion with the court for permission to sell real property. This is a crucial step because, during bankruptcy proceedings, the court has control over your assets and the sale of your home may impact how your creditors are repaid. The motion must include essential details such as the proposed selling price, your intended use of the proceeds, and the names of any creditors who hold liens on the property. This ensures that everyone involved is aware of the transaction and the financial outcomes.
The filing of this motion gives your creditors and the bankruptcy trustee the opportunity to object to the sale, particularly if they believe it will not be in their best interest. For example, if the proceeds from the sale won’t sufficiently cover the outstanding debt, they may argue against the sale or request that funds be allocated differently. The court will review these objections, considering the interests of all parties involved, and then determine the distribution of any funds from the sale. This process is designed to ensure fairness and transparency in how the proceeds are handled.
Once the court grants permission, you will be allowed to proceed with the sale of your property. However, it’s important to note that the process can take time, and the sale must comply with the court’s ruling regarding the distribution of proceeds. Working with an experienced bankruptcy attorney or a real estate professional who specializes in bankruptcy sales can help streamline the process, ensuring that all legal requirements are met and that you’re in compliance with the court’s decision. Having the right team in place will help you navigate these complex steps and make sure the sale of your property is handled smoothly during your bankruptcy proceedings.
Contingency
In a traditional sale, if you are attempting to sell your house during bankruptcy in Washington DC, one important consideration is adding a contingency clause to the contract. This clause explicitly states that the sale is contingent upon receiving permission from the bankruptcy court. This is crucial because, during bankruptcy proceedings, the court has jurisdiction over your assets, including your home. Without this court approval, the sale cannot proceed legally. By adding this contingency, you ensure that both you and the buyer understand that the sale will only happen if the court permits it, giving you the necessary flexibility during the bankruptcy process.
However, under Chapter 7 bankruptcy, the process can become more complicated if your home has high unprotected equity—meaning the value of your home exceeds the amount covered by your bankruptcy exemptions. In such cases, the bankruptcy trustee may decide to sell the house to liquidate the equity. This is because the trustee’s role is to collect and distribute assets for the benefit of creditors. The proceeds from the sale will first be used to pay off any secured debts, such as your mortgage. If your home is sold, the trustee will pay the mortgage lender and any other secured creditors before distributing the remaining funds.
Once the mortgage and secured debts are settled, any remaining funds from the sale are divided. You will be entitled to the amount covered by your bankruptcy exemption, which is typically a set portion of the home’s equity, depending on your state’s exemption laws. Any leftover funds will be used to satisfy the claims of unsecured creditors, such as credit card companies or medical bills. The trustee will distribute these remaining funds on a pro-rata basis, meaning creditors will receive a portion of the proceeds relative to the amount of debt they are owed. While this may feel like a complicated process, having an experienced bankruptcy attorney and real estate agent familiar with bankruptcy sales can help ensure that you navigate these steps effectively and minimize potential complications.
Proceeds
You may wonder what happens to any proceeds after the mortgage is satisfied when you sell your house during bankruptcy in Washington DC. Of course, much will depend on your homestead exemption. However, the proceeds will likely go towards paying any remaining unsecured creditors or paying for the bankruptcy case.
Planned Payments
Under chapter 13, if you sell your house during bankruptcy in Washington DC, you will need to modify your planned payments. Depending on the realized sale value, you may pay your plan off earlier as the proceeds go directly towards the bankruptcy.
Itemized Payoff Statement
To ensure no fees remain to surprise you after you sell your house during bankruptcy in Washington DC, you should request an itemized payoff statement.
Pro Homebuyer Solutions
Don’t hesitate! With competition still driven by low supply and rising interest rates on the horizon, now is the time to cash in on your house, and the best way to sell your house during bankruptcy in Washington DC is to sell directly to the cash investors at Pro Homebuyer Solutions. Our policy at Pro Homebuyer Solutions is full transparency through every step of the process because we want you to decide which sales method works best for your situation. To that end, a cash investor from Pro Homebuyer Solutions will detail your expenditures and potential profits from a conventional listing with an agent, vs. our offer, which you’ll agree is fair. At Pro Homebuyer Solutions, we do this because we are your neighbors here in Washington DC, we care about our community and the people in it, and we want you to feel good about working with us long after the deal is closed.
The seasoned pros at Pro Homebuyer Solutions have experience with sellers going through bankruptcy and have the solution you seek, providing you with a guaranteed closing date, charging no commissions or closing costs with no unpleasant surprises. If you’d like to avoid the work and out-of-pocket costs of prepping your house to list on the Washington DC real estate market, a direct sale to the cash investors at Pro Homebuyer Solutions is the solution. The cash investors at Pro Homebuyer Solutions never charge commissions, and there are no hidden fees. So you can put your wallet away and relax; you won’t even need to worry about showings when you make a direct sale to a cash investor from Pro Homebuyer Solutions. For a no-hassle sale of your home during bankruptcy: a cash investor from Pro Homebuyer Solutions will buy your house directly, as-is, for cash. Call Pro Homebuyer Solutions at (571) 568-8480.
