Can Property Be Sold During Bankruptcy After A Motion For Relief From Stay Has Been Allowed?

Houses and other property can be sold while someone is in bankruptcy, but there are specific rules that must be followed when you do it. As Brett Weiss said in his article Can I Sell My House While I’m In Bankruptcy?, you must get court approval before property is sold. Until a Final Decree has been issued in a case, the property will be tied up. The Final Decree may not have been issued even though the bankruptcy debtor has received a bankruptcy discharge.

Permission from the bankruptcy court must be sought even if the secured lender, usually a mortgage company, has filed a Motion for Relief from Stay. If relief from stay was granted by the bankruptcy court, it means that the creditor can enforce it’s rights under state law, but the property is still controlled by the bankruptcy laws for all other people, including the debtor. So while a mortgage company can proceed with foreclosure after the court allowed the automatic stay lifted, the debtor would still have to file a Motion to Sell in a Chapter 13 bankruptcy case, or possibly a Motion to Abandon Property in a Chapter 7 bankruptcy case.

If you are in an open bankruptcy case and you are trying to sell a house before a foreclosure sale, don’t wait to ask the bankruptcy court for permission to sell or you might not have time to get a hearing. Speak to your lawyer as soon as possible to avoid finding yourself in a position where your house is foreclosed upon even though you have a buyer who is ready to close.

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