Bankruptcy is a word you don’t want to hear or experience personally. It likely means that finances are tight and you’re looking for a way to alleviate financial stress. Just know you’re not alone. Many people are feeling financially stressed and looking for solutions.
Depending on what bankruptcy you’re looking at, the question of what happens to your house could be on your mind. If you’re in this tough situation, wondering if you can keep your house or should sell it, you’ll want to keep reading. The good news is that selling a house during bankruptcy is an option, and we buy houses in Wilmington, NC, to help families get through challenging times with dignity and speed.
Below, we’ll take a look at your options so you don’t feel overwhelmed. This blog post will explain everything you need to know about selling your house during bankruptcy in North Carolina and explore why working with a cash buyer might be a better option.
Bankruptcy and Your Home
Bankruptcy is confusing; there are different chapters and rules that make it difficult to understand. To make this easier to follow, we’re going to try to break this down as best we can.
When you file for bankruptcy, your house becomes part of your bankruptcy estate. This means the bankruptcy court has some say in what happens to your property. But on a brighter note, that doesn’t automatically mean you’ll lose your home. This all depends on several factors, including the type of bankruptcy you filed and how much equity you have in your home.
In NC, there are two main types of bankruptcy. Chapter 11 and Chapter 13. Each one treats your house differently. Learning more about these differences can help you make the right decision about selling your home.
Chapter 7
Chapter 7 bankruptcy is called “liquidation bankruptcy“. Think of Chapter 7 as liquidating what you own to pay off debts. Certain things fall into exempt and nonexempt property. So in this process, the bankruptcy trustee can sell nonexempt property/items to pay your creditors. But, North Carolina’s homestead exemption may protect some or all of your home’s equity. If you have a decent amount of equity, more than what the exemption covers, the trustee may want to sell your house to pay off debt.
Chapter 13
Chapter 13 bankruptcy is known as the “wage earner’s plan”. This means that a repayment plan is made to pay back your debts over a period of time, usually 3-5 years. Good news – in chapter 13, you usually get to keep your house as long as you stay up to date on your mortgage payments and follow your payment plan.
When You Need to Sell During Bankruptcy
Timing is everything, and there may be certain situations where selling your house is the best option.
Say you’re behind on mortgage payments and can’t catch up, selling your house might be helpful to avoid foreclosure and save you from damaging your credit score.
If the stress of keeping up with mortgage payments and paying other bills is becoming too much to juggle, it may be a good idea to sell your house.
Another situation you may need to sell your house is if the bankruptcy trustee determines that you have too much equity in your house that isn’t protected by exemptions. So, rather than letting the trustee control the sale, you may want to sell your house yourself (with court approval, of course) so you can have more control over the sale.
Some people sell because they need to downsize or move to a more affordable house. Selling before filing bankruptcy could mean a fresh start and finding a place that fits your new budget.
Getting Court Approval to Sell
If you’ve already filed for bankruptcy and are thinking about selling your house, you’ll need to get approval from the court. At this point in the process, it’s legally required to get the green light to sell. The reason is that this protects both you and your creditors. To start the process, you’ll need to file a motion with the bankruptcy court to ask permission to sell your property.
If you’re working with a bankruptcy attorney, they will help you prepare this motion. The motion includes details about the proposed home sale, the listing price, the terms of the sale agreement, and how the money from the sale will be used. After the motion is filed, the bankruptcy judge will review your request and any information from the bankruptcy trustee and creditors who object.
Starting the motion process early is important because getting court approval can take some time. It’s the court’s job to make sure the sale is best for everyone, including your creditors. They want to make sure that you’re getting a fair price for your house and that the sale helps your financial situation overall.
Why Traditional Sales are Complicated During Bankruptcy
In general, selling a house is challenging. The traditional way of using a real estate agent, while in bankruptcy, comes with extra challenges. As mentioned above, you’ll need court approval before you can list your house, which means you may be waiting a while to start the process.
Currently, it takes 42 days to sell a house in NC; that’s the time it takes to get an offer after listing the home. This time frame doesn’t include repairs, cleaning, and staging. It also doesn’t include the average closing timeline, which takes 30-60 days for the buyer to close on the house. All things to keep in mind when time is of the essence.
The overall cost of a traditional home sale is also a big deal because it can eat into your proceeds. We’re talking about real estate commissions (5-6%), closing costs (2-3%), repairs, and other expenses that can reduce the money you have left to pay creditors or start fresh. Since you’re already dealing with financial stress, these extra costs can be painful.
Another thing to factor into the equation is market conditions. Depending on when you’re trying to list your property, the market may not be in your favor to sell quickly. For example, if your house needs repairs or if the local real estate market is slow, a traditional sale with a realtor could drag on for months without a guaranteed buyer.
Cash Buyer Advantage During Bankruptcy
We’ve discussed the struggles of listing your home with a realtor and trying to sell the traditional way, but you may be wondering if there is another option. Fortunately, yes, there is! Working with cash home buyers has several advantages when it comes to selling your home in bankruptcy. The biggest advantage is speed. Cash buyers can close in just weeks, compared to months in a traditional home sale. Speed is so important if you’re facing foreclosure or if your bankruptcy trustee is pressuring you to resolve your property situation quickly.
Another perk of selling to a cash buyer, they usually buy houses in “as-is” condition. Translation- you don’t need to spend any money on repairs, improvements, cleaning, or staging. When you’re dealing with bankruptcy, you probably don’t have extra cash lying around for home improvements, so being able to sell without fixing anything is a big deal.
Working with a cash buyer is also very simple. There are fewer moving parts, less paperwork, and fewer chances for things to go wrong. And during an already stressful time, having a simple process can be a big relief.
ILM Home Offer is a local cash buyer that has worked with several families going through financial hardships. That said, they are willing to work with your timeline and bankruptcy requirements. They understand you’ll need court approval and can structure their offer to make the court approval process easier.
How it Works with a Cash Buyer
When it comes to working with cash buyers, the process is super simple and meets all legal requirements. You’ll start by contacting the cash buyer and providing them with basic information about your house and where you’re at in the bankruptcy process.
Next, the cash buyer will visit your home to learn more about its condition and value. Unlike a traditional buyer who might ask for you to make repairs, the cash buyer will make you an offer based on its current condition.
Once you receive their offer, you’ll work with your bankruptcy attorney to file the necessary paperwork to motion the court. The cash buyer can give you documentation to support the court approval process, including proof of funds and specific details about their offer.
After the court approves the sale, the closing process moves quickly. Cash buyers don’t need to wait for mortgage approval, appraisals, or inspections, so closing can happen as soon as the paperwork is ready to go.
Working with Your Bankruptcy Attorney
Your bankruptcy attorney plays a big role in selling your home during the bankruptcy process. They’ll help you figure out if selling is the right choice for your current situation and guide you through the legal process.
A good local bankruptcy attorney knows the ins and outs and preferences of local bankruptcy judges. They can help you structure your home sale request in a way that’s more likely to be approved. They’ll also make sure you understand how the sale process will be handled and what portion you might be able to keep. Preparing all the necessary court documents and appearing with you at any hearing related to the sale is also part of their job. They can also coordinate with the cash buyer to make sure all legal requirements are met.
It’s best not to handle the bankruptcy process without professional help. The relationship between you and your bankruptcy attorney is protected by attorney-client privilege, so you can speak freely about your concerns and goals. Their main goal is to help you through the legal process of bankruptcy.
Protecting Your Interests During the Sale
Even though you’re going through bankruptcy, you have rights as a homeowner. So you’ll want to make sure you understand what those rights are and how to protect yourself during the sale process.
Something you’ll want to learn more about is the homestead exemption in North Carolina. The homestead exemption might protect some of your home’s equity, which could mean you get to keep some of the proceeds from the sale of your property.
You’ll also want to make sure it’s clear how the sale proceeds will be distributed. After you pay off your mortgage lender and any liens on the property, the remaining money will become part of your bankruptcy estate. However, you may be able to keep some proceeds from the sale if they fall within the exemption limits.
Another thing you’ll want to make sure of is that the sale price is fair. The bankruptcy court will want to verify that you’re getting a reasonable amount for your home based on its value. A reputable cash buyer will provide documentation showing how they arrived at their offer price.
Finally, you’ll want to keep detailed records of all communication and sale documents on hand. This documentation can be important if any questions come up during the court approval process.
Timeline and Expectations
To help plan and reduce stress, understanding the timeline for selling your house during bankruptcy would be helpful. When you work with a cash buyer, the entire process from start to finish typically takes 4-8 weeks. Traditional home sales using the timeframes mentioned above usually take several months (average days on market in NC, which is 42 + the average closing period of 30 to 60 days = 72 to 102 days to sell).
The court approval process is another factor you’ll want to consider. Typically, it takes two to four weeks after filing your motion to get approval. During this time, creditors have the chance to object to the sale, and the trustee reviews the proposed terms.
After you get court approval, closing with a cash buyer can happen within one to two weeks. This fast timeline can be incredibly helpful if you’re trying to stop foreclosure or meet other deadlines in your bankruptcy case.
You do want to keep in mind that every bankruptcy case is different, and your timeline may vary based on your specific situation and local court schedule.
Common Concerns and How to Address Them
One big concern that homeowners worry about is losing all their equity when they sell during bankruptcy. While it is true that sale proceeds become part of your bankruptcy estate, the North Carolina homestead exemption might protect some of your equity. So you’ll want to talk to your bankruptcy lawyer about how much protection you might have.
Some people worry that selling during bankruptcy will hurt their credit score even more, but actually, voluntarily selling your house often causes less credit damage than letting it go into foreclosure. Ultimately, taking charge of your financial situation by selling can be better for your long-term financial recovery.
Another common concern is whether the sale price will be fair. Reputable cash buyers give transparent info about how they determined their offers, and the bankruptcy court also reviews the sale process to make sure it’s reasonable.
You might also worry about where you’ll live after the sale. Many cash buyers can work with flexible closing dates to give you time to find new housing. Some people use this as an opportunity to downsize and reduce housing costs to help rebuild their financial situation.
Why ILM Home Offer?
When you’re dealing with bankruptcy and need to sell your house ASAP, it helps to work with a cash buyer who understands your situation. The team at ILM Home Offer does understand your unique situation and the challenges you’re facing. We’ve helped many homeowners in North Carolina navigate the challenging process of selling their homes during bankruptcy.
We know how to work with bankruptcy attorneys and courts to make the application process run smoothly. We provide the documentation needed for court approval and can adjust our timeline to meet your legal requirements.
We buy houses in ANY condition, which means you don’t need to spend any money you don’t have on repairs or improvements. We also don’t charge real estate agent commissions and may be able to help pay closing costs. Our offers are fair and based on current market conditions as well as your home’s actual condition.
The entire process is meant to reduce your stress during an already stressful time. We handle paperwork with your attorney and move quickly to get you to closing. If you’re looking for cash home buyers in Burgaw or need to sell your house fast in Jacksonville, we serve the entire southeastern North Carolina area and would be happy to help you!
Moving Forward After the Sale
Selling your house during bankruptcy can be a positive step towards financial recovery. It removes the stress of monthly mortgage payments you may not be able to afford and might provide you with some extra cash to help you start fresh.
You’ll want to use this time to create a realistic budget for your new living situation. Without the stress of an unaffordable mortgage, you might find it easier to manage your other expenses and start rebuilding your credit.
Consider this a great opportunity to downsize and simplify your life. Many people discover that having fewer financial worries reduces their stress and makes it easier to focus on their financial recovery.
Along the way, you’ll want to stay in contact with your bankruptcy attorney, so they can help you if you have any questions about how the sale affects the rest of your bankruptcy case or what steps come next for your family.
Get Professional Help
You definitely don’t want to try to sell your house in bankruptcy on your own. It’s highly recommended to work with professionals who know bankruptcy and real estate because the laws are confusing, and mistakes can be expensive.
Make sure your first call is to your bankruptcy attorney when thinking about selling your house. They can help you decide if selling is the best option and walk you through the process.
If you decide to sell to a cash buyer, make sure you choose one with experience in bankruptcy sales. They should know about the court approval process and be willing to work with your attorney to meet all the legal requirements.
Most bankruptcy attorneys offer free consultations to go over your options, and reputable cash buyers like ILM Home Offer offer free no no-obligation cash offers for your home.
Final Takeaways
The final point we’d like to make is that selling a house during bankruptcy in North Carolina doesn’t have to be stressful or overwhelming. Yes, it does involve court approval and working with a bankruptcy attorney, but it can be a way to help you get back on your feet. As cash buyers in NC, we have experience helping homeowners in these tough situations.
The key is to know your options and work with professionals who can guide you through the entire process. Whether you’re in Chapter 7 or Chapter 13 bankruptcy, selling your home might be the answer for you to have debt relief and a fresh start.
If you’re ready to learn about how our home buying process works at ILM Home Offer, we’d be happy to talk about your situation. Feel free to contact us today for a no-obligation all-cash offer for your home. We look forward to working with you and helping you move forward with confidence during this difficult time.