Selling Your Home While in Bankruptcy: What Newton Homeowners Need to Know

Bankruptcy is one of the most stressful financial situations you can face. You're dealing with overwhelming debt, creditor calls, and the fear of losing everything—including your Newton home. Maybe you've already filed for bankruptcy, or you're considering it and wondering what happens to your house.

Here's what many people don't realize: Filing bankruptcy doesn't automatically mean you lose your home. And in many cases, selling your house during or just before bankruptcy can actually improve your financial situation.

Let me explain how bankruptcy affects Newton homeowners and what options you have for your property.

Understanding Bankruptcy Types

There are two main types of personal bankruptcy:

Chapter 7 Bankruptcy

What It Is: "Liquidation bankruptcy"

• Discharges most unsecured debts (credit cards, medical bills)
• Takes 3-6 months
• May require selling non-exempt assets

Regarding Your Home:

• You can keep it if you're current on mortgage and it's protected by exemption
• If you have significant equity beyond exemption, trustee may sell it
• If you're behind on mortgage, lender can still foreclose

North Carolina Homestead Exemption: $35,000 ($70,000 for married couples filing jointly)

Chapter 13 Bankruptcy

What It Is: "Reorganization bankruptcy"

• Create repayment plan for 3-5 years
• Keep assets while paying back portion of debts
• Can catch up on missed mortgage payments through plan

Regarding Your Home:

• Can keep home if you follow repayment plan
• Must stay current on ongoing mortgage payments
• Can cure mortgage arrears over life of plan

Selling Your Home Before Bankruptcy

Many Newton homeowners consider selling before filing:

When This Makes Sense

You have equity: Selling lets you pay off debts and possibly avoid bankruptcy entirely

Example:

• Newton home value: $200,000
• Mortgage balance: $120,000
• Unsecured debts: $50,000

Sell traditionally:

• Net proceeds after fees: ~$70,000
• Pay off $50,000 in debts
• Keep $20,000
• Avoid bankruptcy

You're facing foreclosure: Selling before foreclosure avoids credit damage and may leave you with cash

Downsizing helps: Moving to cheaper housing reduces expenses and makes recovery easier

When to Wait

No equity: If you owe more than it's worth, selling before bankruptcy doesn't help

Exemption protects your equity: If your equity is within NC's $35,000 exemption, you might keep the home through bankruptcy

Chapter 13 can save the home: If you want to keep it and can afford payments, Chapter 13 lets you catch up on arrears

Selling During Chapter 7 Bankruptcy

If you've already filed Chapter 7:

The Automatic Stay

The moment you file, an "automatic stay" stops:

• Foreclosure proceedings
• Collection calls
• Lawsuits
• Repossessions

This gives you breathing room, but it also means you can't sell your home without permission.

Trustee's Role

When you file Chapter 7, a trustee is appointed to:

• Review your assets
• Determine what's exempt vs. non-exempt
• Sell non-exempt assets to pay creditors

Your home's status depends on equity:

Scenario A: No Equity or Negative Equity

• Home value: $180,000
• Mortgage: $175,000
• Equity: $5,000
• Result: Protected by exemption, trustee won't sell, you can keep it or sell it

Scenario B: Equity Within Exemption

• Home value: $200,000
• Mortgage: $170,000
• Equity: $30,000
• Result: Within $35,000 exemption, protected

Scenario C: Equity Exceeds Exemption

• Home value: $220,000
• Mortgage: $160,000
• Equity: $60,000
• Result: Trustee may sell to access $25,000 above exemption ($60,000 - $35,000)

Selling With Trustee Approval

If you want to sell during Chapter 7:

Process:

1. Contact your bankruptcy attorney
2. Attorney files motion with court requesting permission to sell
3. Propose how proceeds will be distributed
4. Court hearing (trustee and creditors can object)
5. If approved, complete sale
6. Proceeds distributed per court order

Timeline: Add 30-60 days to normal sale process for court approval

Distribution of Proceeds:

1. Mortgage payoff
2. Selling costs
3. Your exemption amount ($35,000)
4. Remaining to trustee for creditors

Selling During Chapter 13 Bankruptcy

Chapter 13 is reorganization, not liquidation, so rules differ:

Trustee Approval Required

All asset sales during Chapter 13 require trustee and court approval.

Why: The court needs to ensure:

• Sale benefits the bankruptcy estate
• Creditors receive fair treatment
• You're not hiding money

Common Reasons to Sell in Chapter 13

1. Can't afford mortgage even with Chapter 13 plan

• Chapter 13 helps catch up arrears but doesn't reduce payment
• If ongoing payment is unaffordable, selling makes sense

2. Need to relocate for job

• Job loss may have caused bankruptcy
• New job in different city requires moving

3. Downsizing to affordable housing

• Selling expensive home to buy/rent cheaper housing
• Reduces expenses and makes Chapter 13 plan more workable

4. Major repairs needed

• Can't afford repairs on top of Chapter 13 payments
• Selling avoids throwing money into property you can't afford

How It Works

Process:

1. Consult bankruptcy attorney
2. File motion to sell property
3. Explain reasons and propose distribution of proceeds
4. Court hearing
5. If approved, sell the home
6. Proceeds may:
   • Pay off mortgage
   • Pay Chapter 13 plan in full (discharge early)
   • Increase monthly plan payments
   • Allow modification of plan

Benefits:

• Can eliminate mortgage payment burden
• May allow early discharge if proceeds pay plan
• Gives you fresh start in affordable housing

Working With Lenders During Bankruptcy

If You Want to Keep the Home

Chapter 7: You must "reaffirm" the mortgage debt, agreeing to remain personally liable

Chapter 13: Continue making payments as part of your plan

If You Want to Sell or Walk Away

Chapter 7: Lender can't come after you for deficiency (debt is discharged)

Chapter 13: Depends on plan terms and whether debt is discharged

Important: Stay in communication with your lender and bankruptcy attorney.

Cash Buyers and Bankruptcy Sales

Selling to a cash buyer like Triton Homebuyers can simplify bankruptcy home sales:

Advantages

Speed: Cash buyers close in 14-30 days once court approves

• Traditional buyers take 60-90 days after court approval
• Faster closing means faster relief

Certainty: No financing contingencies

• Conventional buyers often can't get financing on bankruptcy-owned property
• Cash offer won't fall through

As-Is Sale: No repairs needed

• You likely can't afford repairs anyway
• Cash buyers account for needed work in offer

Simplicity: Straightforward transaction

• Trustee prefers simple, clean sales
• Fewer complications means easier court approval

Process for Bankruptcy Sale to Cash Buyer

1. Contact cash buyer (like Triton Homebuyers)
2. Receive cash offer
3. Consult bankruptcy attorney
4. Attorney files motion to sell showing cash offer
5. Court approves sale
6. Close quickly (no financing delays)
7. Proceeds distributed per court order

Timeline: 45-75 days total (30-60 days court approval + 7-14 days closing)

Real Example: Newton Chapter 13 Case

The Situation:

• Newton couple filed Chapter 13
• Home worth $195,000
• Mortgage balance: $178,000
• $1,400/month mortgage payment
• Behind $14,000 in arrears (included in Chapter 13 plan)
• Husband's job relocated to Charlotte
• Could no longer afford Newton home

Traditional Sale Complications:

• Behind on payments (in Chapter 13)
• Needed court approval
• Couldn't afford repairs
• Needed to move in 60 days for new job

Triton Homebuyers Solution:

• Cash offer: $182,000
• Attorney filed motion to sell
• Court approved in 30 days
• Closed 12 days later

Proceeds Distribution:

• Mortgage payoff: $178,000
• Net proceeds: $4,000
• Paid into Chapter 13 plan
• Couple rented affordable apartment in Charlotte
• Successfully completed Chapter 13 after move

Newton-Specific Considerations

Catawba County Bankruptcy Court

Catawba County bankruptcy cases are filed in Charlotte's Western District of North Carolina Bankruptcy Court.

Trustees: Experienced with property sales Process: Well-established procedures

Local Market

Newton's smaller market affects bankruptcy sales:

• Fewer buyers for homes needing work
• Traditional sales may take longer
• Cash buyers provide reliable option

Property Values

Understanding true market value is crucial:

• Can't rely on Zillow estimates
• Bankruptcy court wants real comps
• Professional appraisal may be required

Tax Implications

Cancellation of Debt Income

If lender forgives shortfall in bankruptcy:

• Normally taxable as income
• Bankruptcy Exception: Debt discharged in bankruptcy is NOT taxable

This is a huge advantage of bankruptcy over short sales outside bankruptcy.

Capital Gains

Selling primary residence:

• Up to $250,000 gain tax-free (single)
• Up to $500,000 gain tax-free (married)
• Must have lived there 2 of last 5 years

Most Newton homes fall well within these exclusions.

Common Questions from Newton Homeowners

"Can I sell my house the day before filing bankruptcy?"

Technically yes, but be very careful. The trustee will scrutinize recent transfers of assets. If done improperly, you could face fraud allegations. Always consult a bankruptcy attorney before selling immediately before filing.

"What if I'm already in foreclosure when I file bankruptcy?"

The automatic stay stops foreclosure immediately—but temporarily. You'll need to either:

• Catch up on payments (Chapter 13)
• Negotiate with lender
• Sell the home
• Eventually allow foreclosure to proceed

"Will selling my home affect my bankruptcy discharge?"

Not if done properly with court approval and proper distribution of proceeds. Your attorney will ensure it's handled correctly.

"Can I use a real estate agent during bankruptcy?"

Yes, but all fees come from proceeds. Some trustees prefer cash buyers to save commission costs.

"How much will I get from the sale?"

After mortgage payoff and selling costs, remaining proceeds up to your exemption amount ($35,000 in NC). Anything above exemption goes to creditors in Chapter 7 or to your Chapter 13 plan.

Working With an Attorney

Critical: Never try to sell property during bankruptcy without attorney guidance.

Your bankruptcy attorney will:

• Advise whether selling makes sense
• File all necessary motions
• Represent you at hearings
• Ensure proceeds are properly distributed
• Protect your interests

Cost: Usually included in your bankruptcy attorney's fees, or a modest additional fee ($500-$1,500).

Steps to Take Now

If you're in bankruptcy or considering it and wondering about your Newton home:

1. Consult bankruptcy attorney: Get professional advice on your specific situation
2. Assess your options: Keep the home or sell?
3. Understand your equity: Know current value vs. mortgage balance
4. Get cash offer: See what selling looks like (no obligation)
5. Make informed decision: Compare keeping vs. selling

Don't assume you'll lose your home or that you have no options. Many paths exist.

How Triton Homebuyers Helps

We've worked with numerous Newton homeowners going through bankruptcy. We understand the process and can help.

What we offer:

• Experience with bankruptcy sales: We know the court approval process
• Fast cash offers: Get your numbers quickly to inform decisions
• Work with your timeline: Close when court approves
• No repairs needed: Sell as-is in current condition
• No agent commissions: More proceeds for you

We're not here to take advantage of your difficult situation. We provide a legitimate solution that helps you move forward.

Moving Forward

Bankruptcy feels like failure, but it's actually a legal tool to get a fresh start. Your Newton home is an asset that can help or hurt your recovery.

If selling makes sense for your situation, we can help make it happen quickly and fairly.

Contact Triton Homebuyers today for a free consultation about selling your home during bankruptcy.