If you own a home when you file for bankruptcy, it becomes part of the bankruptcy estate, the property or assets you own. Bankruptcy filings were a rather low occurrence during the COVID-19 pandemic, but now they are on the rise. In December of 2023, 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 from prior year which is a rather sizeable growth. As evidenced by these metrics, many homeowners are overwhelmed by their debt. As financial issues due to circumstances beyond their control changed their ability to pay creditors and lenders, 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 $2,750,000 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, homeowners want to sell their houses to solve some of their financial difficulties but wonder if it is possible during bankruptcy proceedings. Generally people have a very limited understanding of bankruptcy procedures. Below you’ll be able to read a bit on the process and how everything works if you choose to file a bankruptcy.
The rules for a bankruptcy process differ depending on the type of bankruptcy you file under. There are also many factors that may influence the final determination for what bankruptcy you decide to file under. Enjoy the below read as we explore how to sell your house during bankruptcy in Alabama. Please note that this article is for informational purposes, not financial or legal advice. We recommend discussing with a professional and licensed financial advisor or a practicing attorney before taking the action of filing a bankruptcy.
Court Permission For Bankruptcy
In order to sell your home in Alabama during a bankruptcy procedure, you’ll need to file a motion with the court to secure approval to sell your house. You’ll want to include as much information as possible in the court motion when bringing the case to them such as the selling price, your plans for the proceeds, and names of creditors holding liens on the property. This motion allows your creditors and any trustee to object with the court determining the disbursement of any funds you’d gain from selling the house.
Contingency Clause
For a traditional home sale in Alabama, you’ll need to add a contingency clause to the contract 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 from the Sale of a Home in Bankruptcy
You may wonder what happens to any proceeds after the mortgage is satisfied when you sell your home during bankruptcy in Alabama. You’ll be required to use the proceeds from the sale to pay off any unsecured creditors.
Planned Payments in Bankruptcy
Under chapter 13, if you sell your house during bankruptcy in Alabama, 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 Alabama, you should request an itemized payoff statement prior to actually selling your home. This ensure that you do not have amount to pay after selling your house that you were previously unaware of.
Sell Your House to North Alabama House Buying During Bankruptcy
Selling your home the traditional way during bankruptcy is challenging as potential buyers could be inexperienced or get cold feet after securing your home with a contract. You’ll also have to deal with request for repairs, many showings, negotiations, and potentially going in and out of contract multiple times. North Alabama House Buyer is a local and trusted real estate company that buys houses as-is, for cash, at a fair price, and in any situation. As an experienced home buying company, North Alabama House Buyer will be able to detail to you the entire process and close on any date you choose. We are a local real estate company and aim to be a reliable resource to anyone needing a professional to buy their home.
Our friendly and experienced team at North Alabama House Buyer has experience with sellers going through bankruptcy and have a custom solution just for you, providing you with a guaranteed closing date, and charging no commissions or closing costs and also communicating with you every detail so there are no unpleasant surprises. If you’d like to avoid the work and out-of-pocket costs of preparing your house to list on the Alabama real estate market, North Alabama House Buyer could be a great solution for you! Our home buying company never charge commissions, and there are no hidden fees. This enables you to put your wallet away and relax; you won’t even need to worry about showings when you make a direct sale to us at North Alabama House Buyer. If you are interested in a no-hassle sale of your home during bankruptcy we’d love to be a resource to you! Feel free to call or text us at (256) 824-9181 or visit us online at www.northalabamahousebuyer.com. We’d be happy to answer any questions you may have and provide you with a fair, as-is, no-obligation, cash offer on your home.