Your house is usually your most valuable asset, especially if it is worth far more than you owe. Depending on a few major factors, selling your home before filing bankruptcy may or may not be a wise decision.
DOES YOUR HOME HAVE A SIGNIFICANT AMOUNT OF EQUITY?
If your home has a significant amount of equity in it, you may find it tempting to sell it before you file for bankruptcy. Be aware, however, that the cashed out equity may become part of the bankruptcy estate. If you spend the equity money after selling your home, your bankruptcy case could be dismissed or you could possibly face bankruptcy fraud charges.
Once you file for bankruptcy, you create a bankruptcy estate. Technically, you place all of the property and debts you own into the hands of the bankruptcy court to manage while your case is open. The court will appoint a trustee to manage your estate during bankruptcy. You cannot sell or give away any of the property in your bankruptcy estate without the court’s consent.
IF YOUR HOME HAS NO EQUITY
If you do not have any equity in your home, selling it before filing bankruptcy could leave you with a deficiency balance and you could be sued by the mortgage company. If the mortgage company does forgive the deficiency balance, taxes may be owed on the forgiven amount. The IRS does not forgive tax debts in bankruptcy. If you are upside down on your mortgage, it may just be better to file bankruptcy instead of trying to sell it beforehand.
YOU CAN REMAIN IN YOUR HOME IF YOU FILE BANKRUPTCY
Bankruptcy can often help a debtor remain in their home while discharging other unsecured debts such as credit cards. If you don’t think you can save your home and are considering selling it, be sure to talk with a qualified, bankruptcy attorney first about how bankruptcy can keep you in your home.
If your bills are piling up and you are overwhelmed financially, give us a call. Bankruptcy might be the best thing you can do for yourself. It will give you an opportunity to wipe the slate clean without having to sell your home.
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