Can I Sell this House after Filing for Bankruptcy?



You have been fighting the black hole of debt for years and are finally facing the possibility of bankruptcy. For many people, your house represents your largest investment, but it also provides shelter for you and your family. Will you be able to recoup some losses by selling your primary residence when all is said and done?

Yes, but It is Complicated 

If you still own your home after your bankruptcy is completed, you are free to sell it, but… 

If you are behind on your mortgage, the lienholder may move forward with foreclosure. You still have to make your monthly mortgage payments on the home. You still need to discharge any tax obligations to the city or local government. You will need to have a plan for where to move next after you sell the property. A bankruptcy expert such as Attorney Jerry Smith can help to smooth the path out of this financial swamp. 

Feel Free to Sell after Your Bankruptcy is Discharged 

Once your bankruptcy is completed, any assets that you still own can be sold. You can use the proceeds of these sales to pay off any unpaid debt that was not included in the proceedings. Bankruptcy courts will not seize your home and car because they recognize that you need a place to live and a way to get to work. At the same time, the courts will not relieve you of the debts associated with the car or house. Selling these last assets may be what you need to start anew without the burden of debt shadowing your next steps. 

Types of Property that Can be Seized During Bankruptcy 

The bankruptcy court will look at your estate and look for items that are not needed to live comfortably. They will seize the extra property and sell it in order to generate cash to pay off your unsecured debts and satisfy the creditors. The courts can seize: 

  • A second home or rental properties 
  • Undeveloped acreage 
  • Travel trailer or motorhome 
  • Private planes and boats 
  • Additional cars beyond those needed for daily transportation 
  • Collectibles, fine furniture, valuable jewelry 
  • Art or fine china 
  • An animal like a racehorse that is deemed to be a luxury, not a source of income 
  • Luxury clothing, handbags, and shoes 

The courts will leave you basic home furnishings, clothing, your family pets, and a car or two along with your primary residence. 

Will Bankruptcy forgive my Mortgage? 

Perhaps your bank filed foreclosure paperwork on your home before you filed for bankruptcy. The Chapter 7 or Chapter 13 filing will halt the foreclosure proceeding, but it does not erase the mortgage. During bankruptcy, you need to keep paying your mortgage as best as you can. Once the bankruptcy is over, the lienholder on your home is permitted to move forward with the foreclosure. 

You cannot sell the home while you are working through bankruptcy, but you can once it is discharged. If you are fighting foreclosure, you may need to work with the bank to allow a short sale where you sell the home for less than what is owed. The bank may forgive the remaining balance, but it will negatively impact your ability to qualify for a new home loan. 

?If I sell the house, can I buy something smaller? 

It seems like the logical solution when looking to reduce your monthly payments to move into something smaller and more affordable. However, if you do not have sufficient equity to pay for a new home with cash, you may struggle to find financing. You may need to wait up to two years before any lender will sign off on a new mortgage. In some cases, it can take up to seven years to clear your credit score. 

What about my car? Is that safe? 

The courts recognize that most people living in the suburbs or in a rural community need a car for daily transportation. If you can’t commute to work, you can’t continue to pay down your debt. For that reason, you should be able to keep your car. You will still need to make the monthly payments on the loan. If your lender is about to repossess the car, they will have to wait until the bankruptcy is closed. 

Like your home, if you wait until after the filing is discharged, you can sell the car and use any equity to buy a car that is more affordable. If you own luxury cars, selling one can generate significant cash if you are current on your payments. 


What other debts will still be there after bankruptcy? 

Even though your Chapter 7 or Chapter 13 filing will erase many debts such as credit cards and other unsecured loans, there are some types of financial obligations that will remain. You will still be responsible for child support and alimony, including any back support payments. Your student loans will remain on the books. Tax burdens must be negotiated with the federal, state, and local governments. And of course, your home and car loans are still present. 

For the residents of Indiana that are struggling with debt and bankruptcy, consulting an attorney experienced in debt relief like can help you create a plan of attack that preserves more of your lifestyle while working out from under the mountain. Bankruptcy is a complicated process. A professional consultant will point you toward a brighter and more hopeful future. 

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