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 Ohio. Please note that this article is for informational purposes, not financial or legal advice.
Court Permission
If you’re looking to sell your home while going through bankruptcy in Ohio, you’ll need to take a crucial legal step: filing a motion with the bankruptcy court requesting “leave to sell real property.” This motion essentially seeks the court’s permission to proceed with the sale and must include key details such as the proposed selling price, your intended use of the proceeds, and a list of any creditors holding liens against the property. It’s important to be transparent and thorough in this filing, as the court and trustee will review the motion to ensure that the sale is in the best interest of the bankruptcy estate and that all creditors are treated fairly.
Once the motion is filed, it triggers a notice period, giving your creditors and the appointed bankruptcy trustee the opportunity to object. If there are no objections—or once objections are resolved—the court will issue a ruling that dictates how the sale proceeds are to be distributed. Typically, any secured creditors, such as your mortgage lender or tax authorities, are paid first. If there’s equity left after satisfying those debts, the court may allow you to retain some of the funds, depending on your exemption status and the chapter of bankruptcy you’ve filed under (Chapter 7 or Chapter 13).
Because this process is both legally complex and time-sensitive, it’s strongly recommended to work with a bankruptcy attorney who can guide you through the filing requirements and help you avoid missteps that could delay or derail the sale. Selling a home during bankruptcy is possible—but only with proper court approval and full transparency.
Contingency
In a traditional sale, you’ll need to add a contingency clause to the contract to sell your house during bankruptcy in Ohio, stating that the sale is contingent upon obtaining bankruptcy court permission. However, under chapter 7, the trustee may determine to sell the house if your home has high unprotected equity under your bankruptcy exemption. With the funds, the trustee pays any secured debts like the mortgage, provides you with the exempted amount you are entitled to and then satisfies any unsecured creditors with a pro ratio share of any remaining funds.
Proceeds
You may be wondering what happens to any proceeds left over after satisfying the mortgage when you sell your house during bankruptcy in Ohio. The answer largely depends on your homestead exemption and the type of bankruptcy you’ve filed. In many cases, the proceeds from the sale—after paying off the mortgage and any other liens—will be used to pay off remaining unsecured creditors, such as credit card companies, medical bills, or personal loans. The bankruptcy trustee will oversee the distribution of these funds, ensuring that creditors are paid according to the priority established in the bankruptcy code.
If there are proceeds remaining after all debts are settled, the next question is whether you can keep any of the money. This is where your homestead exemption comes into play. In certain states, including Ohio’s jurisdiction, you may be able to exempt a portion of the equity from the sale, allowing you to retain some of the proceeds to help with relocation costs or rebuilding your financial future. However, any funds beyond the exempted amount will typically be used to pay for the bankruptcy case itself, including administrative fees, legal costs, and other related expenses.
It’s important to note that if you’ve filed for Chapter 7 bankruptcy, the remaining proceeds from the sale of your home will likely be used to settle any unpaid debts. However, if you’ve filed for Chapter 13 bankruptcy, any proceeds may be incorporated into your repayment plan, potentially extending the period over which you pay back creditors. Navigating this process can be complex, so it’s crucial to work with a skilled bankruptcy attorney to understand how the sale will impact your case and what you can reasonably expect to retain.case.
Planned Payments
Under chapter 13, if you sell your house during bankruptcy in Ohio, 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 Ohio, you should request an itemized payoff statement.
Wright Home Offer
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 Ohio is to sell directly to the cash investors at Wright Home Offer. Our policy at Wright Home Offer 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 Wright Home Offer will detail your expenditures and potential profits from a conventional listing with an agent, vs. our offer, which you’ll agree is fair. At Wright Home Offer, we do this because we are your neighbors here in Ohio, 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 Wright Home Offer 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 Ohio real estate market, a direct sale to the cash investors at Wright Home Offer is the solution. The cash investors at Wright Home Offer 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 Wright Home Offer. For a no-hassle sale of your home during bankruptcy: a cash investor from Wright Home Offer will buy your house directly, as-is, for cash. Call Wright Home Offer at 937-998-4239.