Whether or not to sell your home before declaring bankruptcy might or might not be a good idea, depending on a lot of things. You absolutely need to consult with a lawyer if you’re facing this question. This article isn’t intended as legal advice, but just presenting some options you should discuss with your lawyer.
Timing
If you sell your home too close to the time when you declare bankruptcy, the proceeds could be considered part of the bankruptcy estate and go to your creditors. Selling well before considering bankruptcy may be a good idea that your lawyer could help guide you on. A quick house sale can be a good idea when financial difficulties arise, especially if it prevents you from needing to declare bankruptcy.
Homestead Exemption
Your house is your home. If you declare bankruptcy in a state with a homestead exemption, some of the equity may be exempt from bankruptcy proceedings. In this case, it might be better to remain in your home without selling. At the time of writing, PA homestead exemption was only a few hundred dollars, limiting its usefulness in many cases. In NY, the amount is generally much higher, but varies by county. Check with a lawyer in your county.
Alternatively, a quick house sale well in advance of bankruptcy, or better yet in lieu of bankruptcy, could be a good idea. You could turn equity out of your home to move in somewhere else and even have cash leftover.
Short Sale
If your mortgage is the primary reason you’re considering bankruptcy, call your mortgage lender and a lawyer and try negotiating a short sale. It’s effectively an agreement with your lender for them to accept a lower price for your property than what you owe them. Depending on your mortgage balance and market value of the home, it might be a less expensive option for the lender than bankruptcy or a foreclosure.
However, a short sale usually won’t be a quick house sale. Short sales are known to take time as you negotiate with lenders, and even if a lender approves a short sale, a quick house sale isn’t always possible. The lender will want to maximize recovery of their loan, and the market price may play a role in their decisions.
Selling Fast
If you’re in financial distress or might be, even thinking about bankruptcy, first talk with your lawyer, then give us a call. We can offer a quick house sale for cash. This could help maximize your options to cleanup your finances, get you a place to live, and minimize losses. You may not have time to wait.
If you do have more time, find a good real estate agent that can list your property on the MLS and advertise.
Other Tips
If you’re certain you’ll be moving, start moving now. Move stuff into storage or to friend’s and family’s houses. Un-clutter your house if you’ll have real estate agents and clients walking through.
Get all your documents together such as the deed when you first purchased the house. If there are other people on title than just you, talk with them and make sure you’re aligned on if and when you’ll sell – if you purchased the house together, you’ll need to sell it together (there are other options here you can discuss with a real estate agent). Chances of a quick house sale increase if you have all your documents ready.
Credit counseling is probably a good idea if you’ve thought about bankruptcy. They might help negotiate some lower payments with creditors or even debt forgiveness.
Wrapping Up
Bankruptcy is serious business. You can read more about bankruptcy here. A quick home sale might or might not be the right decision; only you and your lawyer can decide that. If you do want a quick house sale, get in touch; if we don’t make a cash offer for your home in Philadelphia or New York, we’ll list it for free.