IWhen you file for bankruptcy, your home becomes part of the bankruptcy estate, which includes all of your property and assets. For many homeowners, this can be a daunting situation, but it’s important to understand how it works. In October 2022, there was a 27% increase in Chapter 13 bankruptcy filings compared to the previous year, and overall bankruptcy filings rose by 7%. This trend strongly aligns with the 7% rise in inflation during the same period. Many homeowners, facing overwhelming debt due to unexpected circumstances, find themselves with no option but to file for bankruptcy. Fortunately, filing for bankruptcy can temporarily halt foreclosure on a primary residence, providing a potential lifeline for those at risk of losing their homes.
Chapter 13 bankruptcy is available for homeowners with secured and unsecured debts totaling less than $2,750,000, allowing them to reorganize and repay debts over time while keeping their property. Chapter 7 bankruptcy, on the other hand, involves liquidating assets to pay off creditors based on the debtor’s total income and financial ability to repay. In both cases, many homeowners want to sell their homes to resolve some of their financial difficulties but are uncertain whether it’s possible to do so during bankruptcy proceedings. The short answer is yes, but the process can vary based on the type of bankruptcy you’ve filed under and other influencing factors. Below, we explore how to navigate the process of selling your home during bankruptcy in Allentown, PA. Please note that this information is for educational purposes only and is not intended to serve as legal or financial advice.
Court Permission
One of the key steps to selling your home during bankruptcy in Allentown, PA is obtaining court approval. Homeowners must file a motion with the court, requesting permission to sell their property. This motion typically includes the proposed sale price, a detailed plan for how the proceeds will be used, and a list of any creditors who hold liens against the property. The court reviews the motion to ensure that the sale is in the best interest of all parties involved, including creditors. Additionally, creditors and the bankruptcy trustee have the right to object to the sale, and the court will ultimately decide how any proceeds from the sale will be distributed. Gaining court approval is essential to ensure that the sale is legally valid and does not violate bankruptcy regulations.
Contingency
If you’re pursuing a traditional sale while in bankruptcy, it’s necessary to include a contingency clause in the contract. This clause specifies that the sale is contingent upon receiving court approval. For homeowners in Chapter 7 bankruptcy, there is an added layer of complexity: the trustee managing the bankruptcy estate may decide to sell the property if it holds significant equity that is not protected under the bankruptcy exemption. In such cases, the trustee will use the sale proceeds to pay off secured debts, such as the mortgage, provide the homeowner with their exempted equity amount, and distribute any remaining funds to unsecured creditors on a pro-rata basis. It’s important to work closely with legal and financial professionals during this process to ensure that all aspects of the sale comply with bankruptcy laws and regulations.
Proceeds
A common question homeowners have when selling their property during bankruptcy is what happens to any proceeds after the mortgage is satisfied. The distribution of funds largely depends on the homestead exemption, which protects a certain amount of home equity from creditors. Once the mortgage is paid off, the remaining proceeds may go toward covering unsecured debts or contributing to the bankruptcy case’s administrative costs. The court will ensure that creditors receive their appropriate share based on the specifics of the bankruptcy case. In Chapter 7 cases, after the trustee pays off secured debts and the homeowner receives their exempted equity, any remaining funds will be distributed among unsecured creditors.
Planned Payments
For homeowners in Chapter 13 bankruptcy, selling a home requires modifying the existing repayment plan. If you sell your home during Chapter 13 proceedings, the court will typically apply the sale proceeds toward paying off the debts outlined in your repayment plan. Depending on the amount of the proceeds, you may be able to pay off your plan early and eliminate the bankruptcy sooner than expected. Alternatively, the court may require you to use the proceeds to pay down certain debts while continuing with the remainder of the repayment plan. It’s crucial to work with a bankruptcy attorney to determine how the sale of your home will impact your payment plan and ensure that all legal requirements are met.
Itemized Payoff Statement
Before completing the sale of your home in Allentown, PA during bankruptcy, it’s essential to request an itemized payoff statement from your mortgage lender. This statement will detail all of the fees, interest, and remaining balance owed on your mortgage, ensuring there are no surprises once the sale is finalized. By obtaining an itemized payoff, you can accurately calculate how much you will owe and what portion of the sale proceeds will go toward satisfying the mortgage. This step is critical in ensuring that the sale process goes smoothly and that all financial obligations are properly addressed.
How iBuyLehigh Can Help With Foreclosure and Bankruptcy
If you’re considering selling your home during bankruptcy, iBuyLehigh can provide a fast, hassle-free solution. With the housing market still experiencing limited supply and rising interest rates on the horizon, now may be the ideal time to sell your home. iBuyLehigh offers a direct sale option, which can streamline the process and help you avoid many of the traditional challenges involved in selling a home during bankruptcy. Our team at iBuyLehigh is committed to full transparency throughout the process, ensuring that you understand your options and feel confident in your decision. We’ll provide a detailed comparison of the costs and potential profits from listing your home with a real estate agent versus accepting our fair cash offer.
At iBuyLehigh, we have experience working with homeowners going through bankruptcy and are prepared to offer flexible solutions tailored to your situation. We charge no commissions or closing costs, and you can avoid the expense and hassle of preparing your home for the market. A direct sale to iBuyLehigh means you can sell your home as-is, without the need for repairs or showings. We guarantee a closing date, often within days, so you can move forward with your financial recovery quickly. If you’re looking for a no-hassle, transparent way to sell your home during bankruptcy, Contact iBuyLehigh at (484) 549-0019 today. Let us help you regain control of your financial future.