I Filed Bankruptcy…Can I Sell My House Now and Keep My Equity?
There are a lot of questions that need answers before the decision to file bankruptcy. There are a lot of questions that come up during the bankruptcy process. And there are more questions that crop up once the bankruptcy is closed and the discharge is received. One common “post-bankruptcy” question is, “Can I sell my house and keep the equity once my bankruptcy is completed?”
Once the bankruptcy case is closed, the petitioner can sell any remaining assets they still own, including their home. If they still own their home once their bankruptcy case is closed, that means the bankruptcy trustee abandoned the house as an asset of the bankruptcy estate. It is important to point out that selling your home after bankruptcy may be problematic if the plan is to immediately turn around and buy a new home.
Once the bankruptcy is complete and you still own your home, the lender can choose to initiate or move forward with foreclosure proceedings if the mortgage is in default. At this time, you may choose to attempt to sell the property instead of seeing the foreclosure proceedings roll on. Some petitioners decide to sell their home at this time even if their mortgage is in good standing. If a buyer is available and willing to pay an amount that would cover the mortgage balance, the funds from the home sale could then be used to eliminate this last chunk of debt you walked out of your bankruptcy with. In fact, you could even earn a profit if you hold equity in the home. If a buyer is available, but not willing to pay enough for the home to cover the remaining mortgage balance, you could negotiate with your mortgage lender regarding a short sale of the property. This allows you to sell a property for less than what is owed.
While you CAN sell a home immediately after bankruptcy, you can also buy a home after bankruptcy. As you might expect, bankruptcy can actually be an impediment to qualifying for a conventional mortgage for seven years. You may be able to obtain an approval on a mortgage insured by the Federal Housing Administration after approximately two years, but will at least be able to show that you have re-established good credit during the two years since filing for bankruptcy.
Some will still decide to sell their home (and keep any equity resulting from the sale) immediately after receiving their discharge. Many of these individuals and/or families will spend some times renting a home after bankruptcy. Some landlords require credit checks and could view your bankruptcy filing as a negative when considering renting you a property, but this isn’t always a problem.
If you have additional questions about what happens after you receive your discharge of debt or how to regain your footing after filing for bankruptcy, please get in touch with one of the experienced southern California bankruptcy attorneys at Westgate Law.