Can I Sell My Home While I am a Debtor in Chapter 13?

by Jonathan Ginsberg, Esq.

June 8, 2007

Yes, you can sell your home while you are in the middle of your Chapter 13 case. However, do not wait until hours or days before closing to start the process of gaining approval for the sale from your Chapter 13 trustee and your Bankruptcy Judge.

In the Northern District of Georgia (Atlanta area), where I practice, the process for obtaining Court permission to sell your home is fairly straightforward, although it involves a lot of paper and will create a great deal of extra work for your lawyer. Your jurisdiction may or may not have similar rules – check with your lawyer to find out.

First, let your lawyer know before you put your house on the market. The Bankruptcy Court where your case is filed may have special rules about authorizing a real estate agent to represent you. Also, your agent needs to be aware that you are in bankruptcy and the agent may want to include language in the offer and acceptance forms that notify the prospective buyer that no sale can be consummated without authorization from the Bankruptcy Judge.

It has been my experience that buyers can get very antsy if the existence of your bankruptcy case is revealed in the middle of the negotiation process. Better to put that fact out in the open so that it is not a surprise.

As soon as you receive an offer that you plan to accept, call your bankruptcy lawyer. Ideally, your acceptance of the offer should be conditioned upon your gaining approval from the Court to finalize the sale. You should also encourage your agent to start working on a draft closing statement. Your attorney will need to file a Motion asking the Court for permission to conclude the sale.

This type of Motion to Sell Property needs to set out who is getting paid at closing and how the proceeds will be disbursed. Often the Chapter 13 trustee will ask that some or all of the proceeds be sent to the trustee as a payment on your case.

You and your lawyer may have a different idea about where the closing proceeds should go – perhaps you need funds to move or to make a down payment on another piece of property. The more time and information your lawyer has about the sale and your future plans, the better he/she can represent your interests.

Where I practice the process of collecting the information needed to draft a Motion to Sell, the time required to give the trustee and creditors an opportunity to object and the time required to negotiate with the trustee will take about 30 to 45 days. So, if you plan to sell your house and you are in bankruptcy, give yourself 30 to 45 days at a minimum so that you will have the necessary Order from the judge that will permit you to proceed with the closing.

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Jonathan Ginsberg, Esq.

I represent individuals in Chapter 7 and Chapter 13 cases filed in the Northern District of Georgia, which includes Atlanta, Newnan, Gainesville and Rome. I publish several informative web sites, including www.atlanta-bankruptcy-attorney.com and an Atlanta bankruptcy blog, www.thebklawyer.com/thebkblog. Please mention Bankruptcy Law Network when you call.

Last modified: June 8, 2007