When you file a Chapter 13 bankruptcy case, most of your real and personal property becomes part of your Chapter 13 bankruptcy estate. A Chapter 13 trustee manages your Chapter 13 bankruptcy estate and is responsible for making important financial decisions that affect the property in this estate. One of these crucial decisions includes buying or selling real estate, including a home.
A Chapter 13 trustee must approve a transaction to buy or sell a home during a pending Chapter 13 bankruptcy case. Most sales and purchases are approved provided that the transactions do not contain any extraordinary or unusual terms.
Any sale is initiated by a motion to sell with the real estate purchase agreement attached, as well as an affidavit of the real estate agent, and a description of how the proceeds are to be distributed. If the terms are reasonable and there are no red flags, the motion should be approved by the trustee. If the trustee approves the motion, it is likely that your bankruptcy judge will concur with the trustee’s decision.
Buying a house as a Chapter 13 bankruptcy debtor is slightly more complicated but hardly impossible. You must have the permission of the trustee which then allows you to apply for financing. Specifically, you must get the trustee’s permission to incur new debt. This lets you apply for a mortgage to finance the home. Provided that your current income is sufficient, and the terms are reasonable, this should not be too difficult.
The problem that may arise is finding approval for a mortgage loan. You must be patient and make sure that you receiving a fair offer whose terms will be approved by the bankruptcy trustee and the bankruptcy judge. Not only that, but you must also be able to afford your new monthly mortgage payment and your Chapter 13 plan payment.
A second issue that may arise is obtaining enough cash for your down payment. If the bankruptcy trustee observes that you have a sudden influx of income, the trustee may decide that you also have enough income to make a higher Chapter 13 plan payment. This process may be tricky, but the advice of an experienced bankruptcy attorney can help make sure that you properly navigate all requirements and guidelines for buying and selling a home during a bankruptcy case.
Contact the Morrison Law Group for a free consultation. We can help you decide if bankruptcy is your best option. Theron Morrison has helped 8,000 people file Chapter 7 and Chapter 13 bankruptcy cases to gain a fresh start. Call 801.456.9933 to schedule a FREE consultation. We have locations in Ogden, Logan, Sandy, Orem, and St. George to serve the residents of the counties of Weber, Cache, Salt Lake, Utah, Morgan, Davis, Washington, and surrounding areas.