When you file for bankruptcy and own a home, it becomes part of the bankruptcy estate, which includes all your property and assets. In October 2022, there was a significant twenty-seven percent increase in chapter 13 bankruptcy filings compared to the previous year. Overall bankruptcies, across all chapters, saw a seven percent increase, closely linked to the seven percent rise in inflation. Many homeowners facing overwhelming debt due to uncontrollable circumstances find themselves with no choice but to declare bankruptcy, a move that can halt a foreclosure on their primary residence.
Individuals with secured and unsecured debts totaling less than $2,750,00 qualify for chapter 13 bankruptcy. On the other hand, chapter 7 involves a liquidation process where the trustee sells off your assets to repay debts based on your income, debt amount, and repayment capability. Many homeowners in this situation consider selling their homes to tackle some of their financial struggles, but they often question the feasibility during bankruptcy proceedings.
The rules governing the process may vary based on the type of bankruptcy filed, and numerous factors play a role in the final decision. However, for most homeowners, the answer is generally affirmative. Keep reading to discover how to sell your house during bankruptcy in Massachusetts. Please bear in mind that this content serves informational purposes and does not constitute financial or legal advice.
Court Permission
You’ll need to file a motion with the court for leave to sell real property or approval to sell your house during bankruptcy in Massachusetts. This is a critical step, as the court must grant permission before any sale can proceed. The motion should include detailed information such as the proposed selling price, your plans for the proceeds, and the names of creditors holding liens on the property.
Filing this motion provides transparency and allows all interested parties, including creditors and the bankruptcy trustee, the opportunity to review and object if necessary. This ensures that the sale is conducted fairly and in accordance with bankruptcy laws. The court will consider any objections and make a final determination on how the proceeds from the sale will be distributed.
It’s important to consult with your bankruptcy attorney when preparing the motion to ensure all required information is included and presented correctly. This can include providing evidence of the property’s current market value, details of any offers received, and how you plan to satisfy your debts with the sale proceeds.
Additionally, obtaining court approval often requires demonstrating that the sale is in the best interest of both the debtor and the creditors. This might involve showing that the sale will help reduce your overall debt burden and that the proceeds will be used to pay off secured creditors first, in accordance with the priority of claims.
Understanding the types of liens on your property is also crucial. Different liens provide creditors with different rights, and these must be addressed in your motion. For instance, a primary mortgage lien will generally take precedence over other liens.
By carefully preparing your motion and working closely with your attorney, you can navigate the complexities of selling your house during bankruptcy, ensuring that the process is handled smoothly and legally.
Contingency
In a traditional sale, you’ll need to add a contingency clause to the contract to sell your house during bankruptcy in Massachusetts, stating that the sale is contingent upon obtaining bankruptcy court permission. This clause is crucial as it ensures the sale cannot proceed without the necessary legal approval, protecting both the buyer and the seller from potential legal complications.
However, under Chapter 7 bankruptcy, the process can be more complex. The trustee assigned to your case may determine to sell the house if your home has high unprotected equity under your bankruptcy exemption. Unprotected equity refers to the portion of your home’s value that exceeds the allowed exemption amount. If your home’s equity exceeds the exemption limit, the trustee has the authority to sell the property to generate funds for your creditors.
The funds from the sale are used in a specific order. First, the trustee pays off any secured debts, such as your mortgage. This ensures that the primary lienholders are satisfied. Next, the trustee provides you with the exempted amount you are entitled to under the bankruptcy laws. This exemption amount varies by state and is designed to help you retain some value from the sale.
Finally, any remaining funds are distributed among your unsecured creditors. This distribution is done on a pro rata basis, meaning each creditor receives a proportionate share of the remaining funds based on the amount of debt you owe them. This process ensures that the proceeds from the sale are used to satisfy as many debts as possible in a fair manner.
Proceeds
You may wonder what happens to any proceeds after the mortgage is satisfied when you sell your house during bankruptcy in Massachusetts. Of course, much will depend on your homestead exemption. However, the proceeds will likely go towards paying any remaining unsecured creditors or paying for the bankruptcy case.
The homestead exemption plays a crucial role in determining how much of the proceeds you can keep. This exemption allows you to protect a certain amount of equity in your home from creditors. In Massachusetts, the homestead exemption can protect up to $500,000 of your home’s equity if the property serves as your primary residence.
If the equity in your home exceeds the exemption limit, the bankruptcy trustee will use the proceeds from the sale to pay off secured debts, such as your mortgage. Any remaining funds after satisfying the secured debts and covering your exempted amount will be distributed among your unsecured creditors. This process ensures that all creditors receive a fair share of the proceeds, based on the amount you owe them.
It is important to note that in a Chapter 7 bankruptcy, you may only be able to protect the sales proceeds temporarily. The funds will be safe if you reinvest them in a new homestead within a specific time frame, usually six months. Failure to do so may result in the proceeds becoming available to creditors.
In Chapter 13 bankruptcy, you can propose a repayment plan that includes the proceeds from the sale. This plan allows you to retain ownership of your home while paying off your debts over a three to five-year period. The court will approve the plan if it meets the requirements, ensuring that you can manage your debts without losing your property.
Understanding how the proceeds from selling your house during bankruptcy will be handled is essential for making informed decisions and planning your financial future. Consulting with a bankruptcy attorney can provide personalized advice and ensure that you maximize the benefits of your homestead exemption while navigating the complexities of the bankruptcy process.
Planned Payments
Under chapter 13, if you sell your house during bankruptcy in Massachusetts, you will need to modify your planned payments. Depending on the realized sale value, you may pay your plan off earlier as the proceeds go directly towards the bankruptcy.
Itemized Payoff Statement
To ensure no fees remain to surprise you after you sell your house during bankruptcy in Massachusetts, you should request an itemized payoff statement. This document will provide a detailed breakdown of all outstanding amounts that need to be paid off, including the mortgage balance, interest, fees, and any other charges. By reviewing this statement, you can ensure that all debts are accounted for and that there are no unexpected expenses, helping you to manage your finances more effectively during the bankruptcy process.
Gaeta Properties
Don’t hesitate! With competition still driven by low supply and rising interest rates on the horizon, now is the time to cash in on your house, and the best way to sell your house during bankruptcy in Massachusetts is to sell directly to the cash investors at Gaeta Properties. Our policy at Gaeta Properties is full transparency through every step of the process because we want you to decide which sales method works best for your situation. To that end, a cash investor from Gaeta Properties will detail your expenditures and potential profits from a conventional listing with an agent, vs. our offer, which you’ll agree is fair. At Gaeta Properties, we do this because we are your neighbors here in Massachusetts, we care about our community and the people in it, and we want you to feel good about working with us long after the deal is closed.
The seasoned pros at Gaeta Properties have experience with sellers going through bankruptcy and have the solution you seek, providing you with a guaranteed closing date, charging no commissions or closing costs with no unpleasant surprises. If you’d like to avoid the work and out-of-pocket costs of prepping your house to list on the Massachusetts real estate market, a direct sale to the cash investors at Gaeta Properties is the solution. The cash investors at Gaeta Properties never charge commissions, and there are no hidden fees. So you can put your wallet away and relax; you won’t even need to worry about showings when you make a direct sale to a cash investor from Gaeta Properties. For a no-hassle sale of your home during bankruptcy: a cash investor from Gaeta Properties will buy your house directly, as-is, for cash. Call Gaeta Properties at (781) 258-6976.