Your Home and Bankruptcy in a Nutshell

Considering selling your home can be a complex decision, especially if you’re simultaneously facing financial difficulties and contemplating bankruptcy in Georgia. Specifically:

• If you’re in Chapter 13, court approval is typically required to sell your home. The proceeds are often used to pay off debts.
• In Chapter 7, the trustee may sell your home if it has significant equity. However, Georgia exemptions often protect homeowners.

Bankruptcy in Georgia doesn’t necessarily force a home sale, and there are options for keeping your property during Chapter 13 or selling strategically after Chapter 7 discharge. The process can differ depending on the type of bankruptcy you file and the equity you have in your home. This article will explore the legalities of selling your home during or after bankruptcy, and it is intended as a summary. A bankruptcy attorney in Georgia can help you make informed decisions regarding your circumstances, but some background is useful.

 

 

Can You File Bankruptcy Then Sell Your House?

Yes, you can sell your home before, during, or after filing for bankruptcy in Georgia. However, the impact on your bankruptcy case and the proceeds from the sale will depend on several factors, including:

• The Chapter of Bankruptcy You File: Chapter 7 and Chapter 13 have different rules regarding asset sales.
• Exemptions: Georgia allows homeowners to exempt a certain amount of equity in their primary residence from liquidation during bankruptcy.
• The Purpose of the Sale: If you sell your home at a fair market value and use the proceeds to pay down debt, it generally won’t affect your bankruptcy case. However, selling below market value or transferring ownership to close relatives before filing can raise red flags.

Chapter 7 is a liquidation bankruptcy where your non-exempt assets are sold to pay back creditors. If your home equity exceeds the Georgia exemption limit, the Chapter 7 trustee might be able to sell your house to distribute the proceeds to creditors.

Chapter 13 is a reorganization bankruptcy where you create a repayment plan to pay a portion of your unsecured debt over 3-5 years. You can typically keep your home in Chapter 13, but you might need court approval to sell it and use the proceeds to pay off your mortgage or other secured debts.

It’s crucial to consult with a Georgia bankruptcy attorney to understand the specific implications of selling your home in your situation.

 

Purchases from the Proceeds

The purpose behind selling your home before filing for bankruptcy can significantly impact your case. Here’s how the intended use of the proceeds can affect your bankruptcy:

• Paying Down Debt: If you sell your home for a fair market value and use the proceeds to pay off creditors before filing for bankruptcy, it generally won’t affect your eligibility. This demonstrates good faith and an attempt to resolve your financial situation.
• Transferring Ownership to Close Relatives: Selling your home to a family member or friend at a significantly lower price than market value shortly before filing for bankruptcy might raise suspicion with the court. This could be seen as an attempt to hide assets from creditors fraudulently.
• Luxury Purchases: Using the proceeds from your home sale to fund extravagant purchases right before filing for bankruptcy can also be problematic. It can raise questions about your financial management and potentially lead to your case being dismissed.

Always be transparent about selling your home and intending to use the proceeds in your bankruptcy filing.

 

The Risks of Selling or Transferring Nonexempt Property Before You File for Bankruptcy

Under Georgia law, selling or transferring assets intending to deceive creditors is considered fraudulent conveyance. If the court discovers you sold your home below market value to a close relative or friend shortly before filing for bankruptcy, they could:

• Deny your bankruptcy discharge, which would leave you responsible for your debts
• Force you to repay the fraudulently transferred value of the asset to your bankruptcy estate
• Pursue legal action against you

It’s important to consult with a bankruptcy attorney before selling any non-exempt assets, including your home, to ensure you’re not jeopardizing your case.

 

How Do Exemptions Work in Chapter 7?

Georgia law allows homeowners to exempt a portion of their home equity from liquidation during a Chapter 7 bankruptcy. The current exemption amount for a homeowner’s primary residence is $40,000 for a single person and $80,000 for a married couple filing jointly.

• Equity Value Below Exemption: If the equity in your home falls below the Georgia exemption limit, your house is generally protected from being sold by the bankruptcy trustee.
• Equity Value Above Exemption: If your home equity exceeds the exemption amount, the Chapter 7 trustee might have the legal authority to sell your house to pay back creditors. However, you can potentially negotiate a redemption agreement with the trustee to buy back your home for its fair market value minus the exemption amount.

 

 

Protecting Your Home Equity in Chapter 7 or Chapter 13 Bankruptcy

There are strategies you can explore to protect your home equity during bankruptcy in Georgia, depending on the chapter you file under:

Chapter 7

• Maximizing Exemptions: If your home equity falls slightly above the Georgia exemption limit, you might explore legal options to increase your exemption amount. An experienced bankruptcy attorney can advise on strategies like claiming increased homestead protection due to disability or dependency.
• Redemption Agreement: If the Chapter 7 trustee decides to sell your home because your equity exceeds the exemption, you can negotiate a redemption agreement. This allows you to repurchase your house from the bankruptcy estate for its fair market value, minus the exemption amount. This requires securing financing quickly to cover the redemption cost.

Chapter 13

• Repayment Plan: Chapter 13 allows you to keep your home by incorporating your mortgage payments into your repayment plan. This can help you catch up on missed payments and potentially reduce your overall debt over 3-5 years.
• Mortgage Modification: In Chapter 13, you can explore modifying your existing mortgage with your lender. This could involve lowering your interest rate, extending the loan term, or forgiving some of the principal amount owed. A successful mortgage modification can make your mortgage payments more manageable within your Chapter 13 plan.

A Georgia bankruptcy attorney can advise you on a strategy that protects your home equity and aligns with your financial goals.

 

Chapter 13 Bankruptcy and Past-Due Mortgage Payments

If you’re behind on your mortgage payments and considering Chapter 13 bankruptcy, this chapter offers a chance to catch up and potentially save your home. Here’s how Chapter 13 can help:

• Catch Up on Missed Payments: Your Chapter 13 plan will include funds to pay your mortgage arrears over 3-5 years. This allows you to become current on your mortgage and avoid foreclosure.
• Prevent Foreclosure: Filing for Chapter 13 automatically puts a stay on foreclosure proceedings. This gives you time to develop a repayment plan and potentially save your home.
• Future Payment Stability: Chapter 13 can help you restructure your finances and create a sustainable budget. This can help you avoid future missed payments and keep your home long-term.

It’s important to note that successfully completing your Chapter 13 plan is crucial to keeping your home. Missing payments during your plan can lead to its dismissal and potentially result in foreclosure.

 

 

Get Legal Help Protecting Assets

Feeling lost and unsure about your options after a financial setback? At Kostopoulos Bankruptcy Law, we help Georgia residents facing difficult financial situations explore their options under bankruptcy law. We understand the emotional and legal complexities involved and are dedicated to guiding you through the process with compassion and expertise. Protect your home, explore debt relief solutions, and gain a fresh start.

Contact Kostopoulos Bankruptcy Law today to set up a free consultation. You can reach our offices by calling (877) 705-1326 or going online. We’ll help you find the path to financial peace of mind.

 

Questions About Selling Your Home in Bankruptcy

Can you sell your house after bankruptcy discharge?

Yes, you can absolutely sell your house after your Chapter 13 bankruptcy discharge. Once you successfully complete your Chapter 13 repayment plan and receive a discharge order from the bankruptcy court, your debts included in the plan are legally eliminated. This means you can sell your home and use the proceeds for any purpose, including paying off any remaining unsecured debts or making a fresh start financially.

How much equity can I have in my home and still file for Chapter 7 in Georgia?

The amount of home equity you can have and still qualify for Chapter 7 bankruptcy depends on Georgia’s homestead exemption. This exemption protects a portion of your home equity from liquidation by the bankruptcy trustee. The current homestead exemption in Georgia allows for $40,000 of equity protection for a single filer and $80,000 for married couples filing jointly.

• If your home equity falls below these limits, your house is generally safe from being sold to creditors in Chapter 7.
• If your equity exceeds the exemption amount, the Chapter 7 trustee might be able to sell your home. However, you might be able to negotiate a redemption agreement to repurchase your house for its fair market value minus the exemption amount.

Does bankruptcy stop foreclosure in Georgia?

Filing for Chapter 13 bankruptcy automatically triggers a stay on foreclosure proceedings. This legal pause allows you to develop a repayment plan and potentially save your home. During the Chapter 13 plan, you’ll make monthly payments, including catching up on missed mortgage payments (arrears) and your ongoing mortgage obligation. Successfully completing your Chapter 13 plan allows you to keep your home and avoid foreclosure.

Can bankruptcy force the sale of a home?

In Chapter 7 bankruptcy, if your home equity exceeds Georgia’s homestead exemption and you cannot reach a redemption agreement with the trustee, the court might order the sale of your house to pay creditors. However, this is typically a last resort.

Chapter 13 bankruptcy, on the other hand, is designed to help you keep your home. You can catch up on missed mortgage payments through your repayment plan and potentially modify your loan terms to make them more affordable.

How long after filing for bankruptcy can I buy a house in Georgia?

After filing, bankruptcy law doesn’t impose a waiting period on buying a house in Georgia. However, qualifying for a mortgage can be challenging with a recent bankruptcy on your credit report. Lenders typically look for a history of responsible credit management; bankruptcy filing can negatively impact your credit score for several years.

Consulting with a mortgage lender or credit counselor can help you understand the timeframe for rebuilding your credit and qualifying for a new mortgage after bankruptcy.

What will happen if I can’t protect my property when filing for bankruptcy?

If your non-exempt assets, such as a car or other valuables, exceed the bankruptcy exemption limits, the Chapter 7 trustee might liquidate them to pay your unsecured creditors (creditors you owe money to without collateral, like credit cards or medical bills).

However, Chapter 13 bankruptcy offers an alternative. You can keep your non-exempt property by incorporating the value into your repayment plan. This allows you to spread out payments over several years and potentially repay some of your unsecured debts.

Can I sell my house before filing for Chapter 7 or Chapter 13 bankruptcy?

You can potentially sell your home before filing for bankruptcy in Georgia. However, bankruptcy law prohibits fraudulent transfers. Selling your house to a close relative or friend for significantly less than market value shortly before filing could raise suspicion with the court and jeopardize your case.

It’s crucial to consult with a bankruptcy attorney before selling any assets, including your home, to ensure you comply with bankruptcy law and avoid any complications in your case.

 

 

Contact Us for Information on Bankruptcy in Georgia

Are you facing overwhelming debt and considering how bankruptcy affects selling your home? Don’t delve into the complexities of bankruptcy law alone. The experienced attorneys at Kostopoulos Bankruptcy Law can help you understand your options in Georgia, protect your assets, and achieve a brighter financial future.

Schedule a free consultation today by calling (877) 705-1326 or visiting our website. We understand the challenges you’re facing, and we’re here to help you find a solution.

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