Seller Beware: Just Because The Market Is Hot Doesn’t Mean Bankruptcy Filers Should Sell Their Property

The real estate market in Alabama is hot right now. Tight inventory and low-interest rates make it a seller’s market. While it may be tempting to sell off any property you have in order to take advantage of the good prices sellers are getting, anyone who has recently filed for bankruptcy or is considering filing, should be cautious.

Selling Property Before Filing for Bankruptcy

If you anticipate filing for bankruptcy sometime in the next year, you should speak with an experienced bankruptcy attorney before selling any property. An attorney who focuses mostly or exclusively on bankruptcy cases can consult with you and go over the ins and outs of your specific situation, so you can make the most informed decision on how you wish to proceed.

If you sell now, and file for bankruptcy later, the court could force you to turn the proceeds of the sale over to your creditors. However, if you need to sell property in order to meet your basic needs — paying for housing, food, medicine, or clothing — you may be able to keep the money from the sale. This again is something you should discuss with a seasoned bankruptcy attorney to determine which scenario applies to your specific circumstances.

The bankruptcy court is going to look very closely at the timing of the sale, the amount of money generated by the sale, and your intentions when you sold the property. It can be a huge headache. It is often better to hold on to property until after your bankruptcy case has closed, even if you risk the market cooling a little bit. Once your bankruptcy has been discharged, then you can sell your home without the courts closely examining how the proceeds of the sale will be used.

The Padgett & Robertson team can advise you if you have property you want to sell and are later planning on filing for bankruptcy. Contact our office today to set up a consultation with one of our experienced attorneys.

Selling Property During Bankruptcy

If you have already filed for bankruptcy and are now interested in selling some property, you will need to seek the bankruptcy court’s permission to do so. This is because all of your assets are considered part of your bankruptcy estate as soon as you file a case. And as such, any sale of property would be overseen by the bankruptcy trustee.

If you filed for Chapter 7 bankruptcy and used an exemption to prevent the bankruptcy court from selling your home to pay off creditors, you will have a hard time convincing the court that you should be allowed to sell your property and do whatever you want with the proceeds. The court may allow you to sell your home but require that some or all of the money generated by the sale be used to pay off creditors.

If you filed for Chapter 13 bankruptcy and are keeping up with your mortgage payments through the court-supervised repayment plan, the court will typically allow you to sell your home so long as your mortgage lender will not be financially harmed by the sale. The court may require you to use some of the proceeds of the sale to pay creditors.

If you do not want to involve the court, you can simply wait until your bankruptcy case is closed and then sell your property. Most Chapter 7 cases are resolved within a year of filing. Chapter 13 cases last for several years because of the repayment plan element, so it will be a while before you are out from under the purview of the court.

The Padgett & Robertson team is here to help if you have questions about selling property during bankruptcy.

Mobile Bankruptcy Attorneys You Can Trust

The Padgett & Robertson team has been helping people in Mobile and the surrounding area navigate the bankruptcy process for decades. We have seen the housing market boom and bust several times, so we know how to advise our clients who want to take advantage of favorable market conditions.

If you have questions about selling property before or during bankruptcy, we are ready to answer your call. Please contact us today to schedule an initial consultation, and we will go from there.