If you own a home when you file for bankruptcy, it becomes part of the bankruptcy estate, the property or assets you own. In October of 2022, there was a twenty-seven percent increase in chapter 13 bankruptcy filings over the previous year. Bankruptcies, including all chapters, total a seven percent increase overall, which correlates strongly with the seven percent increase in inflation. Many homeowners are overwhelmed by their debt. As financial issues due to circumstances beyond their control changed their ability to pay creditors, they find they have no option but to claim bankruptcy, which can stop a foreclosure on their primary residence.
Those with secured and unsecured debts totaling less than $2,750,00 are eligible for chapter 13. However, chapter 7 is a liquidation process in which the trustee sells your assets to pay debts based on your total income, debt, and ability to repay. Often, these homeowners want to sell their houses to solve at least some of their financial difficulties but wonder if it is possible during bankruptcy proceedings.
While the rules for the process may differ for the type of bankruptcy you file under, and many factors influence the final determination, for most homeowners, the short answer is yes. So read on as we explore how to sell your house during bankruptcy in Wilmington, NC. Please note that this article is for informational purposes, not financial or legal advice.
Court Permission
When selling your house during bankruptcy in Wilmington, NC, you’ll first need to file a motion for leave to sell real property with the court. This motion is essential as it requests approval for you to move forward with the sale of your home. You will need to provide key details such as:
- The selling price of the house
- How you plan to use the proceeds
- Names of creditors holding liens on the property
Once the motion is filed, the trustee and creditors have the opportunity to raise any objections. The court will then decide how the funds will be disbursed. If you are in a Chapter 7 bankruptcy, the court’s role is to ensure that the process is fair to all parties involved and that creditors are compensated appropriately from the sale.
It’s important to understand that the court’s approval is required to ensure that the sale does not interfere with your bankruptcy plan and that all legal requirements are satisfied.
Contingency
In a traditional home sale, you would typically add a contingency clause to your sale contract to make the deal contingent on receiving bankruptcy court approval. In the context of bankruptcy, especially under Chapter 7, the bankruptcy trustee might determine whether to sell the house, especially if there’s significant unprotected equity that exceeds your bankruptcy exemptions.
Once the house is sold, the trustee will:
- Pay off any secured debts like the mortgage
- Provide you with any exempted equity you are entitled to
- Use the remaining funds to satisfy unsecured creditors in a pro-rata manner
This means the sale process in bankruptcy is designed to balance both your needs and the claims of your creditors, ensuring fair treatment for all parties involved.
Proceeds
What happens to the proceeds from the sale of your house during bankruptcy in Wilmington, NC? After the mortgage is satisfied, the proceeds from the sale will likely be distributed in the following manner, depending on your specific homestead exemption:
- Secured debts such as the mortgage are paid first.
- Any remaining proceeds will go toward settling unsecured debts like credit cards, medical bills, or personal loans.
- A portion of the proceeds may also cover bankruptcy-related fees, including the court costs and the trustee’s fees.
It’s crucial to understand that the exact distribution of proceeds will depend on the specifics of your bankruptcy case, your exemptions, and the sale price. You may be entitled to a portion of the proceeds, but much of it will likely go toward paying off creditors.
Planned Payments
Under Chapter 13 bankruptcy, the situation changes a bit. If you decide to sell your house during bankruptcy in Wilmington, NC, the proceeds from the sale may be used to modify your bankruptcy plan. Depending on how much your property sells for, these proceeds can help pay off your Chapter 13 plan earlier than expected.
For example:
- The proceeds from the sale will go toward fulfilling any remaining obligations within the bankruptcy plan.
- If the sale value is high enough, it could allow you to complete your bankruptcy case sooner, enabling you to move forward with a clean slate.
The key benefit here is that selling your property could potentially reduce your financial burden more quickly and allow you to reorganize your debts in a manner that is more manageable.
Itemized Payoff Statement
To avoid any surprise fees or confusion after you sell your house during bankruptcy, it’s always a good idea to request an itemized payoff statement. This statement should detail:
- All remaining balances (secured and unsecured debts)
- The breakdown of funds from the sale, including mortgage payoff, liens, and any additional costs associated with the sale
Having a clear, itemized statement will help you understand where each dollar from the sale goes and ensure that no unexpected fees or charges arise after the transaction. This transparency is crucial in maintaining control over your financial situation during bankruptcy.
Coastal NC Cash Offer
The process of selling a house during bankruptcy can feel overwhelming, but Coastal NC Cash Offer is here to guide you through it. With the current market driven by limited housing supply and rising interest rates, now may be the best time to cash out on your home—especially if you’re facing financial difficulties.
At Coastal NC Cash Offer, we believe in full transparency throughout the entire process. When you sell your house to our trusted cash investors, we’ll provide you with a detailed breakdown of:
- The costs involved in listing your house with an agent
- What you’ll net from our fair cash offer versus a traditional sale
We do this because we care about our community in Wilmington, NC, and we want you to make an informed, confident decision that benefits your future. When you choose Coastal NC Cash Offer, we treat you like a neighbor, offering a stress-free, straightforward sale.
We understand the challenges homeowners face when going through bankruptcy. That’s why the professionals at Coastal NC Cash Offer specialize in direct home sales to help those in financial distress. We offer no commissions, no closing costs, and no hidden fees, ensuring that you don’t face unexpected surprises along the way.
If you’re looking to sell your home quickly without the hassle of repairs, showings, or listing fees, a direct sale to Coastal NC Cash Offer is the perfect solution. We’ll buy your home as-is, for cash, with a guaranteed closing date—giving you peace of mind and the opportunity to move forward.
Let us help you avoid the lengthy and complex process of a traditional sale, and get a fair, fast, and hassle-free solution that works for you. Contact Coastal NC Cash Offer today to learn more about how we can help you sell your house during bankruptcy in Wilmington, NC. (910) 319-8878.