Selling Your Property Inside an Active Bankruptcy - Westgate Law

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Selling Your Property Inside an Active Bankruptcy

If you are considering both selling your house AND filing for bankruptcy, you should consider a few “bankruptcy” facts before moving forward. First, there are differences between the bankruptcy dismissal and the bankruptcy discharge. A bankruptcy discharge indicates that all debts are written off or paid in full. However, a bankruptcy dismissal indicates that you still owe some or all creditors listed. These accounts will be listed on your credit reports, as they will still be active.

In either case, you must show potential lenders that you have established credit since the bankruptcy. You can begin to establish new credit after filing and/or pay all debts owed at time of filing.

If you need to sell your house, take into consideration that doing so inside an active bankruptcy will not be easy because lenders are reluctant to work with the homeowner who is filing. This comes from the fear that they as lenders would violate bankruptcy laws, thus they prefer working with the homeowner directly, outside the bankruptcy shield. It will be much easier to sell a property once the bankruptcy is closed, either by dismissal or discharge.

A motion will have to be filed with the bankruptcy court if you do want to sell your property before your bankruptcy is dismissed or discharged. This is not complicated to do, but may result in additional attorney fees. If your case is dismissed and then you attempt the sale of your property, you will save attorney fees.   You will also avoid the delay of trying to get court approval.

Having a bankruptcy dismissed can be a lengthy process. Some bankruptcy district trustees can take months to dismiss a case for nonpayment. There are cases that took over 6 months to be dismissed even though no payments had been made to the Chapter 13 trustee.

A wage deduction from your employer could be ordered by the bankruptcy trustee for nonpayment before a case is dismissed. This would force you to file a motion to dismiss your case. You need to know how your Chapter 13 trustee handles cases with delinquent payments.

In the case of a property sale, it might be advantageous to wait a few months before attempting to sell, as there are quite a few issues to consider. Your attorney can help you understand the pros and cons in this situation.

To discuss the pros and cons of selling your house inside an active bankruptcy with a southern California bankruptcy lawyer, contact Westgate Law.

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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