One of the most stressful situations any homeowner can face is having to go through bankruptcy when owning a home. The questions begin to pile up quickly, Can I sell my residence? Will the court seize my earnings? Do I need permission? Will I lose everything?
Well, here is the simple truth: you can sell your house and are allowed to do so with both Chapter 7 & Chapter 13 bankruptcies. Who gets to control the process and the rules, however, and even the time frame, is massively different based on what chapter you fall under. One mistake, such as attempting to sell your house without a court? s approval, can endanger your bankruptcy discharge and cost you thousands of dollars more than you anticipate.
This guide essentially explains what each chapter allows you to do, where the major differences are, and why a fast cash sale is usually considered the cleanest solution if you want to sell your home while in bankruptcy. This is for educational purposes only; every situation is different, and before you take any action regarding your property, consult a qualified bankruptcy attorney.
Bankruptcy Home Exemption: What Happens the Instant You File
As soon as you submit a bankruptcy motion (Chapter 7 or Chapter 13) an enormous authorized safety known as the automated keep is imposed. This federal injunction automatically stops almost all creditor collection actions, including foreclosures, lawsuits, wage garnishments and collection calls under 11 U.S.C. § 362.
For instance, the automatic stay is a protection and limitation for homeowners. The court orders that lenders cannot proceed with a foreclosure sale until they get permission from the court, but it also means that your property is now considered part of what the law refers to as your bankruptcy estate, which is under court control. After all, you cannot just slap your home on the MLS and accept a buyer’s offer with plans to close like nothing has changed.
No matter if you are in trouble with a distressed property or just beaten down by debt, it is critical that you know what happens next under every chapter.
And, if so, what does that mean for selling your home? Plan to Sell Your Home
What Chapter 7 Actually Does
For this reason, Chapter 7 is commonly know as “liquidation bankruptcy.” One of the fastest ways to get rid of most unsecured debt, use credit cards, medical bills and personal loans, in exchange for granting a court-appointed trustee the right to examine non-exempt assets And possibly liquidate them, is through Chapter 7 bankruptcy, according to the U.S. Courts. Chapter 7 cases typically conclude within three to six months.
Technically, the trustee is the administrator of your bankruptcy estate when you file Chapter 7. That includes your home.
Will the Trustee Compel a Sale?
The trustee promises to figure out if selling off your stuff including house will turn some liquid funds for unsecured creditors. This is not a matter of course. A home sale wouldn’t happen unless two conditions were true at the same time:
● Your home equity is greater than the homestead exemption amount your state allows you to keep safe.
● The remaining net proceeds, after paying the mortgage balance, any outstanding liens against the property and costs to close, as well as any trustee fees and your exempt amount would leave sufficient funds to result in a meaningful distribution to creditors.
If there will be so little left for creditors after all these deductions that the trustee can not afford to sell them, he or she has no legal basis to do it. The home is usually safe in that scenario, which applies to many low-equity Chapter 7 filers.
Limits: You can protect so much equity through homestead exemptions.
Each state has a homestead exemption up to a certain amount of equity in your primary residence under 11 U.S.C. § 522. The variation is dramatic:
| State Category | Homestead Exemption Range |
| Low-protection states | $10,000 – $75,000 |
| Mid-range states | $75,000 – $250,000 |
| High-protection states | $250,000 – $500,000+ |
| Unlimited exemption states | No cap (e.g., Texas, Florida) |
Note: Exemption amounts change. Be sure to check with a licensed bankruptcy lawyer for your particular state, as these numbers change over time.
In the case of states like Texas or Florida, where an unlimited homestead exemption exists and your principal residence would be fully exempt in a Chapter 7 bankruptcy. Therefore, for instance, if your state limits the exemption to $75,000 and you have $200,000 in equity the trustee will most likely try to sell. The math matters enormously.
Engaging in Bankruptcy: Can You Do It on Your Own Through Chapter 7?
Yes, but only if the court and a trustee are involved. Since a Chapter 7 filing converts your home into property of the bankruptcy estate, you cannot list or otherwise sell it during an open case without court approval. If the trustee has no interest in the property (because there’s really no non-exempt equity that is worth pursuing), he will drop it eventually, its met with a formal abandonment, wherein you get that property back to sell free and clear.
If you are facing bankruptcy soon and intend to sell first, those operations need some significant ordering. There are different ramifications based on whether you sell before filing, during the case and after discharge for treatment and exemption purposes. That is an area where you will definitely want to consult with a bankruptcy attorney before making any moves.
Is Selling Your Home Chapter 13 Bankruptcy
How Chapter 13 Works Differently
Now, it’s Chapter 13 reorganization bankruptcy, not liquidation. Individuals with regular income can file a repayment plan lasting three to five years, which entitles them to catch up on debts but keep their property, according to the U.S. Courts. You get to keep your home throughout the plan period, unlike Chapter 7 where a trustee is liquidating your assets.
In fact, one of the biggest benefits of Chapter 13 for homeowners is that you can pay back mortgage arrears (late payments on your loan) in a repayment plan, and it may even help save your home from foreclosure. If you’re late on your payments and have a timeline for foreclosure looming, Chapter 13 gives you an organized approach to make that up again. Check out our post comparing this with other options in detail, deed in lieu eviction vs. selling for cash.
CHAPTER 13: CAN I SELL MY HOME?
Yes, but only with court approval. The Chapter 13 bankruptcy estate includes all of your assets, including your home. Your case might either be dismissed or your discharge denied if you make a sale without the permission of the court.
So this is how the general process works to sell your home when you are in an active Chapter 13 case:
Step 1: Contact your bankruptcy attorney
Speak with your attorney about the sale prior to listing your home or talking to any potential buyers. They need to consider the way how any new proceeds will coordinate with your existing repayment plan.
Step 2: File a motion to sell
Your attorney is going to file a formal Motion to Sell Real Property with the bankruptcy court. This motion needs to include the sales price, details on who the buyer is and what benefit they will receive, estimated proceeds from the sale as well as how closing costs will be managed, and a plan to distribute the net funds (usually usefully payables).
Step 3: Notify creditors
When you file the motion, your creditors get notice and generally around 2 weeks to object. Properly filed motions mostly go through without any objections.
Step 4: Await court approval
Approval usually occurs within 20 to 30 days, unless somebody raises an objection (or the judge overrules one). Do not send contracts to sign and do not set a closing date when approval is in place.
Step 5: Close and file a Statement of Sale
When the sale closes, your attorney sends (or is supposed to send) a Statement of Sale to the trustee with what you actually sold it for, how much was deducted from that amount and how much (if anything) is being left over.
If you need a more detailed, step-by-step walkthrough just for Chapter 13 be sure to check our full guide here: Can I Sell My House in Chapter 13 Bankruptcy?
Where do the Sale Proceeds Go?
But in Chapter 13, the proceeds from a home sale usually go toward your repayment plan requirements. After the sale closes, if there are sufficient net proceeds to pay off your entire plan, you might be discharged from bankruptcy soon thereafter. If the proceeds only partially satisfy the plan, your attorney will negotiate with the trustee for a modified repayment plan.
You can keep proceeds up to your relevant homestead exemption. Whether you can retain funds in excess of that amount is a function of the terms of your plan, the discretion exercised by the trustee and court approval.
Moreover, if your property has also been subject to liens or delinquent taxes, those must be included in the computation of sale proceeds. We write more about selling a house with liens or past due taxes here.
At a Glance: Chapter 7 vs. Chapter 13 Comparison
| Factor | Chapter 7 | Chapter 13 |
| Type | Liquidation | Reorganization |
| Typical duration | 3–6 months | 3–5 years |
| Who controls assets | Court-appointed trustee | Debtor (with court oversight) |
| Can you keep your home? | Only if equity is exempt | Yes, if payments are maintained |
| Home sale initiated by | Trustee (in the case of non-exempt equity) or Debtor in Possession (with court approval) | Debtor (with court approval) |
| Court approval required to sell? | Yes, during active case | Yes |
| Proceeds go to | Creditors (after exempt amount returned) | Repayment plan and/or creditors |
| Foreclosure protection | Automatic stay halts foreclosure | Automatic stay + cure of arrears |
| Best for homeowners who… | Have minimal/no equity and want a speedy discharge | Have fallen behind in their payments but want to save the home or sell it off in an orderly fashion |
The Commonality Between Both Chapters of Your Home
There are however quite a few things that stay relatively constant among Chapter 7 and Chapter 13 when your home is involved, despite their stark differences.
Both trigger the automatic stay. Both chapters automatically stop foreclosure proceedings, providing some breathing room to process your options.
Both require that the sale be approved by the court. Chapter 7, if the trustee is selling your home in Chapter 7, it will need approval of the bankruptcy court to do so; similarly in a chapter 13 you would likely be seeking approval to sell a home through the court as well. I mean no one can just move forward with closing without the proper authority.
Both recognize homestead exemptions. Both chapters allow you to shield some of your equity with the homestead exemption in your state.
Both require transparency. You are required to disclose everything you own, what it is worth and any sales that may be in the pipeline to the trustee and court. Even failure to mention or conducting an unauthorized transaction is subject to legal penalties.
Both enable proceeds from the sale to discharge liabilities. The proceeds of sale are paid first to secured creditors (mortgage, liens) in both chapters with anything remaining allocated by the applicable priority rules.
Why A Cash Home Sale Usually Makes The Most Sense During Bankruptcy
In such a case, when you are dealing with bankruptcy the conventional home-selling process brings the extra layers of unnecessary complication to your plate. Traditional buyers usually demand home inspections, appraisal contingencies, and financing through a lender, all of which inject uncertainty and set-up timelines difficult to navigate in the confines of an orderly legal process.
Those variables are pretty much diminished with regards to a cash home sale. This is why often the path of homeowners in a bankruptcy appears to them as the more practical:
Speed. We found bankruptcy courts to be more amenable to cash offers that were clean and well documented with reasonable timelines for closing. The longer your case is open, the more questions remain unanswered so accepting a fast cash offer means less open-ended waiting. At Eagle Cash Buyers, we will make you a fair cash offer within a few short hours and can close in as little as two to four weeks.
As-is purchase. Home owners can sell our property, regardless of condition. The need for not making repairs, cleaning, staging and negotiation inspection concessions, all things that add unwanted stress to a timeline already regulated by the court.
No commission. Conventional agent commissions (ordinarily 5–6%) lessen the net proceeds spoiling your creditors and compensation plan. Eagle Cash Buyers doesnt charge you agent fees and no closing costs.
Predictability. Since we are 100% cash, no financing contingencies, no mortgage approvals, there is zero chance your sale goes south at the last minute, which can be a big deal when your closing is court ordered.
Documented offer. Your bankruptcy attorney can use our written cash offer in the Motion to Sell, which shows that the sale price is fair market value. Courts tend to favor arms length cash transactions that are well documented.
Whether you are in the middle of a Chapter 7 or Chapter 13 case, or maybe looking at filing for bankruptcy and want to see if a sale is right for you first, get a no-obligation cash offer on your home to know what it is worth now.
Pre-Litigation Actions When Going To Sell Your House In Bankruptcy
No matter what chapter fits your situation here is a step you can take before any sale activity begins:
● Check with your bankruptcy attorney first. Not a real estate agent. Not a buyer. Your attorney. All actions regarding your property must be coordinated legally with your case.
● Get an accurate property valuation. The court will be looking for evidence that the proposed purchase price is fair market value. You use an appraisal or a written cash offer as evidence of this.
● Identify all liens and encumbrances. There are also mortgages, delinquent taxes, HOA liens judgment liens and mechanic’s liens that fit into the proceeds” distribution. Your attorney and title co will sort through these things.
● File the appropriate motions. This is known as the Motion to Sell, covered in Chapter 13. If the trustee is the one starting the sale, like in a Chapter 7, that gets handled there (Chapter 7, Section 85.3), but if you’re going to be the one selling your house, your attorney has to work with the trustee.
● Do not enter into contracts unless the court has approved it. Any contract for the sale of a property that is currently in bankruptcy must contain language stating that the transaction is subject to court approval. And closing with no order in hand is a big mistake!
● If you go bankrupt, tell prospective buyers. It is an environment that experienced cash buyers at bankruptcy sales already know. Eagle Cash Buyers has assisted hundreds of homeowners in the same situation as you across all 44 states nationwide!
Frequently Asked Questions
Selling a house while in active bankruptcy
Yes. In both Chapter 7 and Chapter 13 bankruptcy, you can sell your home, but not without going to court first. You can also partner up with your lawyer to propose a sale, or the trustee in charge of your Chapter 7 may initiate the sale. In Chapter 13, your lawyer will file a Motion to Sell on your behalf, and the court must give its authorization before a sale can close.
Do I get any money from selling my home in bankruptcy?
Potentially, yes. What is left over, after your lender has been paid using the sale proceeds, and your homestead exemption amount returned to you, depends on whether or not you have any equity in the home. The court may also permit you to keep other funds for reasonable expenses to pay for alternative housing or, in Chapter 13, otherwise pursue your future financial needs. The specifics are very much dependent on your actual plan terms, any state exemptions you may have, and the Court’s confirmation, consult your bankruptcy attorney.
Will selling my house shut down my bankruptcy?
Not automatically. Even if you’ve gotten your discharge, you do remain in a Chapter 7 bankruptcy case until the trustee has administered whatever assets exist that are subject to liquidation and distribute-sale proceeds to creditors. However, after confirmation of your plan in Chapter 13, if the sale puts enough money in your pocket to pay off your entire repayment plan, the court may discharge you, pulling this off will depend on an assessment by the trustee and necessitates a court order.
That is, can I sell to a relate prior to bankruptcy?
Bankruptcy courts and trustees keep a close watch on sales to insiders, family members, close associates. In some cases, a court will order that the property be valued by an independent party to ensure the price upon sale is reflective of true market value, not favoritism. Such deals are possible but come with a significantly higher level of documentation and transparency.
What if I sell my house without the court’s permission while bankrupt?
If this occurs, it may prevent the sale from being completed (voided), lead to your bankruptcy discharge being denied or other harsh legal consequences such as contempt of court. Do not sell any estate property without prior court approval.
But, can I still sell my house during bankruptcy to a cash home buyer?
Yes. While an all-cash buyer could very much buy your home in bankruptcy and in many ways, an all cash sale is the ideal type of transaction because there are no financing contingencies that would be able to kill the deal after court approval. Your attorney will put language in the purchase agreement that keeps the sale contingent on court approval, a requirement understood and accommodated by a reputable cash buyer.
How long does it take to obtain court permission to sell when in Chapter 13?
It generally takes anywhere from 20 to 40 days after the Motion to Sell is filed by your attorney. Approval can happen in as little as three weeks unless creditors object. If a creditor file an objection that needs a hearing, it may go up to two months or more. When you are coordinating with your buyer, it is important that a window is planned for this purpose.
How does bankruptcy affect what I can sell my home for?
This bankruptcy law does not set a top to nor lower your selling price. In fact, the court mandates your home be sold at fair market value in order to protect the interests of your creditors. The Trustee or a creditor can dispute a sale if it is being sold way below market value (say in a hurry or to your friend). This requirement can be met with either a professional appraisal or an unsecured cash offer from a reputable buyer.
Conclusion: You Have Far More Options Than You Think
You do have some power over your home after bankruptcy. Regardless of which plan your bankruptcy was in, Chapter 7 or Chapter 13, the process permits a sale, in many cases supervised by court and with potential for you to recover financial stability sooner rather than later.
What it does need is coordination: with your bankruptcy attorney, with the trustee and court. And it also needs a buyer who knows how these things work, one that won’t back out when they find out you are going through bankruptcy and one who can act on a timeline that syncs up with your legal proceedings.
Having assisted homeowners in a variety of not-so-attractive scenarios, including but not limited to foreclosure, divorce and inheritance, at Eagle Cash Buyers we understand how to present you with a cash offer that will make the most sense for your bankruptcy case. We pay all closing costs, charge no commissions and can close on a timeline that works with your court process.
Want to know what your home is selling for today? Request a FREE cash offer or call us at (833) 330-1625. We will break every step down for you.
