Selling a home while in bankruptcy can feel like a daunting process, especially when every state and city operates by their own laws and regulations. If you find yourself in the position of selling your home, learning vital information on the relationship between bankruptcy and home sales will be necessary.This includes familiarizing yourself with bankruptcy laws, knowing how to market your house, reaching out for professional advice, and choosing a strategy for selling your home.
What Does Bankruptcy Mean?
Bankruptcy is a legal process that allows you to deal with your debts when you’re no longer able to pay them. Debtors file bankruptcy to obtain a discharge. Discharges essentially wipe out debt so that debtors are no longer obligated to pay it off. Once bankruptcy begins, creditors can’t sue the debtor or collect payment. They also have no claim on the debtors future income or assets.
Who Usually Files For Bankruptcy?
Bankruptcy is the option someone takes when all other debt relief options have been exhausted. Some situations that may lead to filing for bankruptcy include divorce, job loss, or high medical expenses. Although these circumstances don’t always lead to bankruptcy, sometimes if two or more of these events happen consecutively, it can cause enough financial turmoil that bankruptcy becomes the only solution.
You may also be in the position to consider bankruptcy if you have a creditor suing you for debt payment, if your home is in danger of foreclosure, or if all your necessities are being paid through credit cards.
Different Types of Bankruptcy
In the United States Bankruptcy Code, there are six types of bankruptcy defined as the following:
- Chapter 7. Liquidation Under the Bankruptcy Code
- Chapter 9. Municipality Bankruptcy
- Chapter 11. Reorganization Under the Bankruptcy Code
- Chapter 12. Family Farmer Bankruptcy or Family Fisherman Bankruptcy
- Chapter 13. Individual Debt Adjustment
- Chapter 15. Ancillary and Other Cross-Border Cases
The bankruptcy code is under federal law, rather than state law and Chapter 7, 11, and 13 are the most common types of bankruptcy. and Chapter 7 and 13 are the most common filings for individuals.
Chapter 7. Liquidation Under the Bankruptcy Code
When an individual files for Chapter 7 bankruptcy, their debt will be discharged and in exchange the debtor is required to relinquish property to the Chapter 7 bankruptcy trustee. The property that is given up is then sold with the profit given to the creditors. Once complete and debt is discharged, individuals are free from future obligations.
Chapter 11. Reorganization Under the Bankruptcy Code
Typically filed by businesses, but can also be used by individuals who do not qualify for Chapter 13.
Chapter 13. Individual Debt Adjustment
This type of case is for individuals who are looking to catch up on overdue mortgage or car payments, while keeping their assets. In this circumstance, debtors commit to paying all or part of their debt over a period of 3-5 years.
What Happens To My Credit Score?
While bankruptcy is a tool that allows both individuals and businesses to get some relief from debt collectors, it does not necessarily spare your credit score from taking a hit. In most cases, filing for bankruptcy will likely cause a credit score to drop. How much a score drops will depend on how high it was before the bankruptcy.
Those who have no other option left than to file bankruptcy are usually in a position where their credit has already been affected. Although filing for bankruptcy is not good for your credit score, it’s often the only way to salvage a tough financial situation.
Can I Sell My Home During Bankruptcy?
Selling a house while in bankruptcy can be done, but may require legal guidance. The first thing to assess is whether you are selling your home while under a Chapter 7 or Chapter 13 bankruptcy case. The type of case filing will determine which route is best for you to take when selling a home.
For example, in some circumstances it might be better to wait until your debt has been completely discharged before you list your home for sale. When debt is discharged this means that the bankruptcy case is closed and your new slate has begun.
In other cases, it could be more complicated and require permission from the court to sell your home. Getting permission from the court would require showing them how much you intend to sell for. The court may or may not grant your request based on the information you give them. In this circumstance, consult with your attorney and follow their legal advice on how to proceed.
Choosing Between a Traditional Sale or Quick Sale
What is the best option to take in order to sell your home? This will depend on your own personal circumstance and how urgently you need to sell. There are two main routes to take: a traditional sale or a quick sale.
Choosing a traditional home sale will mean finding a realtor to list your home, more documentation, and a longer timeline to sell.
Typically, this option will mean your home will take anywhere between 60-90 days to sell. In some cases it could be longer depending on your city’s housing market.
In contrast, a quick sale occurs when you sell your property to an as-is, all-cash buyer. Those who choose this option typically do so to skip over the traditional paperwork, home showings, inspections, while also selling their home within a shorter timeframe.
Quick sales can be completed within a few weeks.
Because a quick sale acquires the home in its current condition, sellers tend to receive less money than they would in a traditional sale. The trade off is the convenience and speed of a quick sale transaction. If a homeowner is not in the position to wait for paperwork or can not afford repairs, they will opt for a quick sale. After filing for bankruptcy, a quick sale can be a great option if homeowners are looking to procure cash in a short amount of time.
Listing Your Home For Sale
How you market your property plays a vital role in how quickly it attracts and keeps the attention of prospective buyers. Buyers do not need to be informed of your bankruptcy status, instead focus your listing around the property’s selling points and factual information.You’ll want to highlight the home’s attributes and value to make it desirable as possible to others. This will include:
- Build date
- Square footage
- HVAC details
- In-unit laundry details
- Bedroom count
- Available parking spaces
- Yard details
Provide descriptive language that leads with adjectives on the home’s interior and exterior features.
Invest in high-quality photography of the home, stage your furniture to appeal to buyers, and plan to be strategic in pricing the home. Research the housing market in your immediate vicinity and price accordingly. All of these steps will help to reel in the next future owners of the property.
Marketing your home doesn’t have to end with traditional open houses either, you may also use social media to your advantage and bring in more exposure to give yourself the best chance of selling the home as quickly as possible. If you aren’t in the position to host open houses or stage the home for buyers, creating a thorough and descriptive listing for the property will be all the more important.
Sell Your Home To Quickturn Property Solutions For All Cash
If selling your home has become a necessary step after filing for bankruptcy, you can get an all cash offer on your home from Quickturn Property Solutions. We will buy your home in its current condition for cash FAST. You don’t have to wait the 60-90 days of a traditional home sale or spend time finding a realtor and looking for a buyer. We are eager to work with you and purchase your home without any repairs or upgrades on your part. Reach out to us with your information today!
any repairs to anything on your property or make any upgrades to impress us. We buy California homes as-is, we pay all cash for them, and we close really fast.