When homeowners file for bankruptcy, their home becomes part of the bankruptcy estate—essentially all assets they own. In October 2022, chapter 13 bankruptcy filings increased by twenty-seven percent compared to the previous year. Overall bankruptcies rose seven percent, directly mirroring the seven percent inflation rate. Many Houston homeowners find themselves overwhelmed by mounting debt. As unexpected financial hardships impact their ability to meet obligations to creditors, bankruptcy often becomes their only viable option to temporarily pause a foreclosure on their primary residence.
Homeowners with secured and unsecured debts under $2,750,000 can qualify for chapter 13 bankruptcy. Chapter 7, however, involves a liquidation process where a trustee sells assets to pay off debts based on your income level, debt amount, and ability to repay. Many distressed homeowners want to sell their properties to relieve financial pressure but aren’t sure if selling is even possible during active bankruptcy proceedings—especially when facing urgent property issues or homes requiring significant repairs.
While specific rules vary depending on your bankruptcy type and several factors influence the final decision, the short answer for most homeowners is yes—you can sell your property. Let’s explore the practical steps to sell your house during bankruptcy in Houston. Please note this article provides information only and isn’t intended as financial or legal advice.
Court Permission
To sell your house during bankruptcy in Houston, you’ll need to file a motion with the court for leave to sell real property. This document should clearly outline your asking price, plans for the sale proceeds, and names of creditors with liens on the property. This motion gives creditors and trustees the opportunity to raise objections, with the court ultimately determining how the funds will be distributed.
Contingency
For traditional sales during bankruptcy in Houston, you’ll need to include a contingency clause stating the sale depends on bankruptcy court approval. Under chapter 7, however, the trustee may decide to sell the house themselves if your property has substantial unprotected equity exceeding your bankruptcy exemption. The trustee then pays secured debts like the mortgage, provides your exempted amount, and distributes any remaining funds proportionally among unsecured creditors.
Proceeds
You might wonder what happens to excess proceeds after satisfying your mortgage when selling during bankruptcy in Houston. While your homestead exemption plays a crucial role in protecting some equity, remaining funds typically go toward paying unsecured creditors or covering bankruptcy case expenses rather than returning to you directly.
Planned Payments
If you’re currently in chapter 13 bankruptcy and sell your house in Houston, you’ll need to modify your repayment plan. Depending on the final sale price and equity distribution, you might complete your plan earlier than expected since proceeds will go directly toward fulfilling your bankruptcy obligations.
Itemized Payoff Statement
To avoid unexpected costs after selling your house during bankruptcy in Houston, always request a detailed, itemized payoff statement that accounts for all fees and charges that might affect your final distribution.
Space City House Buyers
Don’t delay! With housing inventory still low and interest rates potentially rising, now is the time to make a smart move with your property—and the most straightforward path through bankruptcy in Houston is with Space City House Buyers. As a locally-rooted real estate solutions company serving Harris, Galveston, and Brazoria counties since 2017, we specialize in exactly the challenging situations most buyers avoid. We’ve helped countless Houston-area homeowners facing urgent property issues, whether inherited homes in probate, looming foreclosures, or properties with overwhelming repair needs. Our promise at Space City House Buyers is complete transparency throughout your journey because we want you to choose what truly works for your unique situation. A Space City House Buyers specialist will openly compare potential returns from traditional listings against our fair cash offer. We’re your neighbors here in Houston, deeply invested in our community’s wellbeing, which is why we want you to feel confident in your decision long after closing.
The experienced team at Space City House Buyers has helped numerous homeowners navigate bankruptcy sales with solutions designed for urgent timelines, including guaranteed closing dates with no commissions or closing costs. If you’re hoping to avoid the stress of preparing a distressed home for the Houston market, a direct sale to Space City House Buyers is your solution. While most buyers turn away from properties with major repairs, hoarding conditions, flood damage, or title issues, these are precisely our specialties. We’re often the call after others say no. You won’t need to worry about showings or unexpected expenses—we purchase houses as-is, regardless of condition. For a straightforward, pressure-free bankruptcy sale, Space City House Buyers will buy your house directly for cash, closing in as little as 10 days. Call Space City House Buyers at (713) 913-0890.