What happens if you file a bankruptcy case, and then afterwards suddenly find the perfect buyer (i.e. one who can get financing and will actually go through with the purchase) for your home?
A lot will depend on what chapter your case is filed under. If its a Chapter 7, like the majority of cases, the best strategy is just to wait until the case is finished, then go ahead and finalize the deal.
In Massachusetts, most Chapter 7’s last a little more than three months. In New Hampshire, they can go even quicker. If the buyer really wants the property, it probably won’t be a deal breaker to wait a few more weeks to consummate the sale.
Chapter 13 cases are a different story. This is because these cases usually last between three and five years, while the debtors make monthly payments into their Chapter 13 reorganization plan.
In this case, it will be necessary to get the bankruptcy judge’s permission to sell the property. This is not necessarily hard to do (especially if you are doing something like using proceeds from the sale to pay off your plan). But it does take a motion to the judge to do it, and that probably means one drafted by an attorney. Talk to your bankruptcy attorney about what the exact requirements will be.
If the house is going on the market through a real estate agency, it may also be necessary to get court approval to hire the broker in the first place. Again, this is not a matter of extensive litigation (usually), but you do have to have your bankruptcy attorney approach the judge with the right papers before you just go off and hire a real estate agent.
Finally, keep your eye out for one more trap in Chapter 13. Under the Federal rules of Bankruptcy procedure, Rule 6003 prevents a court form issuing approval to sell in a Chapter 13 until 21 days have gone by after the case is filed. If you really need to file the Chapter 13, you may want to advise the potential buyer that there may be an unavoidable three week delay.
This may sound complicated, but an experienced Chapter 13 bankruptcy attorney can get the entire process to run fairly smoothly. With the technical aspects of the motions, though, this is something that you probably don’t want to try on your own.
By Doug Beaton