Can I Purchase or Sell Real Property During a Chapter 13 Bankruptcy Case?
If you are considering Chapter 13 bankruptcy or if you recently started the process of going through a Chapter 13 bankruptcy case, you should know that this process takes much longer than a Chapter 7 bankruptcy case. Before Chapter 13 debts can be discharged, the debtor will need to develop a repayment plan in order to “reorganize” debts, and consumer bankruptcies under Chapter 13 typically have a timeline of anywhere from three to five years. In other words, your bankruptcy case will take the length of your repayment plan (from three to five years, depending upon your income and other factors), in addition to the amount of time from filing until your repayment plan is approved. Once the terms of the repayment plan are completed, the bankruptcy court will need to review your case to determine whether remaining debts are eligible for discharge.
What all of this means is that, in brief, a Chapter 13 bankruptcy case takes quite a long time. During that time window, professional and life changes might necessitate buying or selling a home. Is it possible to sell your house or buy a new one when you are in the midst of a Chapter 13 bankruptcy case?
Purchasing a Home During a Chapter 13 Bankruptcy Case
It is difficult, but not impossible, to buy a house during a Chapter 13 bankruptcy case. The first step will be to seek permission from the bankruptcy trustee. In order to incur additional debt beyond the debt you had when you filed for bankruptcy, the bankruptcy trustee will need to give permission. Typically, a bankruptcy trustee will be more likely to grant permission to buy a house once you have proven that you can make regular and on-time payments as part of your repayment plan. Accordingly, a bankruptcy trustee might not give permission to buy a house if you have just started the bankruptcy process.
Once the bankruptcy trustee gives permission, the next step is finding a lender who will agree to a mortgage for a purchaser who is in a Chapter 13 bankruptcy. You may need to shop around more than you would otherwise to obtain a lender who is willing to offer a fair rate. Once you find a lender, you will need to come up with the money for your down payment. If you have been saving money toward a down payment, the bankruptcy trustee might say that your ability to save that money actually demonstrates that you can pay more to your creditors (and, as such, you may not be able to use savings for a down payment). If you are planning to obtain a gift from a family member, you will need to be certain that you can document it appropriately.
Selling a House During a Chapter 13 Bankruptcy Case
It is typically easier to sell a house than to purchase a house during a Chapter 13 case. You will need to wait for a short amount of time after filing for Chapter 13 bankruptcy, but then you will be able to move forward with a “motion to sell.” A motion to sell is the document you need to file in order to get approval from the bankruptcy trustee to sell the house. You will need to have the property appraised, and you will usually need to provide detailed information about how any proceeds from the sale will be used.
Once the sale occurs, you will need to file a “statement of sale” with the bankruptcy trustee that needs to account for the use of the proceeds based on the sale price and any deductions.
Contact a Bankruptcy Lawyer in Oak Park for Assistance
If you have questions about your ability to purchase or sell a house during a Chapter 13 bankruptcy case, one of the experienced Oak Park bankruptcy lawyers at our firm can speak with you today. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Risk of Consumer Bankruptcy When Federal Benefits End?
Things You Should Not Do Before You File for Bankruptcy
What all of this means is that, in brief, a Chapter 13 bankruptcy case takes quite a long time. During that time window, professional and life changes might necessitate buying or selling a home. Is it possible to sell your house or buy a new one when you are in the midst of a Chapter 13 bankruptcy case?
Purchasing a Home During a Chapter 13 Bankruptcy Case
It is difficult, but not impossible, to buy a house during a Chapter 13 bankruptcy case. The first step will be to seek permission from the bankruptcy trustee. In order to incur additional debt beyond the debt you had when you filed for bankruptcy, the bankruptcy trustee will need to give permission. Typically, a bankruptcy trustee will be more likely to grant permission to buy a house once you have proven that you can make regular and on-time payments as part of your repayment plan. Accordingly, a bankruptcy trustee might not give permission to buy a house if you have just started the bankruptcy process.
Once the bankruptcy trustee gives permission, the next step is finding a lender who will agree to a mortgage for a purchaser who is in a Chapter 13 bankruptcy. You may need to shop around more than you would otherwise to obtain a lender who is willing to offer a fair rate. Once you find a lender, you will need to come up with the money for your down payment. If you have been saving money toward a down payment, the bankruptcy trustee might say that your ability to save that money actually demonstrates that you can pay more to your creditors (and, as such, you may not be able to use savings for a down payment). If you are planning to obtain a gift from a family member, you will need to be certain that you can document it appropriately.
Selling a House During a Chapter 13 Bankruptcy Case
It is typically easier to sell a house than to purchase a house during a Chapter 13 case. You will need to wait for a short amount of time after filing for Chapter 13 bankruptcy, but then you will be able to move forward with a “motion to sell.” A motion to sell is the document you need to file in order to get approval from the bankruptcy trustee to sell the house. You will need to have the property appraised, and you will usually need to provide detailed information about how any proceeds from the sale will be used.
Once the sale occurs, you will need to file a “statement of sale” with the bankruptcy trustee that needs to account for the use of the proceeds based on the sale price and any deductions.
Contact a Bankruptcy Lawyer in Oak Park for Assistance
If you have questions about your ability to purchase or sell a house during a Chapter 13 bankruptcy case, one of the experienced Oak Park bankruptcy lawyers at our firm can speak with you today. Contact the Emerson Law Firm for more information.
See Related Blog Posts:
Risk of Consumer Bankruptcy When Federal Benefits End?
Things You Should Not Do Before You File for Bankruptcy
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