Can I Sell My House While I’m In Bankruptcy?

by Brett Weiss, Esq.

April 18, 2008

I’m often asked whether a client can sell his or her (or their) house while they’re in a bankruptcy.

The answer is, “Yes,” but it isn’t quite that simple.

Once someone files for bankruptcy relief, whether under Chapter 7, Chapter 11, Chapter 12 or Chapter 13, something called the Bankruptcy Estate is created. The Estate consists of all assets owned by the person at the time they file, and in Chapter 11, 12 and 13 cases, income they receive for some or all of the time their case is open. (Income that is not earned until after the case is filed is *not* part of the Estate in Chapter 7 cases.) So if you own a house when you file, it’s part of the Estate.

What does this mean? It means that the Bankruptcy Court has control over it. In a Chapter 7 case, the The Chapter 7 Trustee can sell it to get money to distribute to your unsecured creditors. The Chapter 13 Trustee can’t sell it, but will consider its equity in computing the Chapter 13 Plan payment. It also means that, because the Bankruptcy Court has control, you must get Court approval before selling the house.

How do you do this? By filing a Motion to Sell with the Court. The Motion to Sell lets the Court determine what happens to the proceeds from the sale, makes sure that the terms, conditions and expenses of sale are reasonable, and lets it oversee the process. It typically takes about 30 days from the date the Motion is filed until it is granted.

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Brett Weiss, a senior partner at Chung & Press, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11 and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his law partner, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute, the Bankruptcy Bar Association of Maryland, and the Civil Justice Network. He has been recognized as a “Super Lawyer” every year since 2007 for Maryland and the District of Columbia, and in 2011 received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, The United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.

Last modified: January 3, 2012