If you own a home when you file for bankruptcy, it becomes part of the bankruptcy estate, the property or assets you own. In October of 2022, there was a twenty-seven percent increase in chapter 13 bankruptcy filings over the previous year. Bankruptcies, including all chapters, total a seven percent increase overall, which correlates strongly with the seven percent increase in inflation. Many homeowners are overwhelmed by their debt. As financial issues due to circumstances beyond their control changed their ability to pay creditors, they find they have no option but to claim bankruptcy, which can stop a foreclosure on their primary residence.
Those with secured and unsecured debts totaling less than $2,750,00 are eligible for chapter 13. However, chapter 7 is a liquidation process in which the trustee sells your assets to pay debts based on your total income, debt, and ability to repay. Often, these homeowners want to sell their houses to solve at least some of their financial difficulties but wonder if it is possible during bankruptcy proceedings.
While the rules for the process may differ for the type of bankruptcy you file under, and many factors influence the final determination, for most homeowners, the short answer is yes. So read on as we explore how to sell your house during bankruptcy in North Carolina. Please note that this article is for informational purposes, not financial or legal advice.
Court Permission
When selling your house during bankruptcy in North Carolina, the first step is to seek approval from the bankruptcy court. This involves filing a motion for leave to sell real property, which includes the proposed sale price, how you plan to use the proceeds, and a list of all lienholders or creditors associated with the property.
This legal step ensures that everyone with a financial interest in the property—such as the bankruptcy trustee or creditors—has the opportunity to review and object if necessary. Once reviewed, the court will decide how the proceeds will be distributed according to bankruptcy law.
Contingency
For traditional home sales during bankruptcy in North Carolina, a contingency clause must be added to the sales contract. This clause clarifies that the sale is conditional upon receiving court approval. It protects both buyer and seller in the event that permission is delayed or denied.
If you’re filing under Chapter 7, and your home has significant non-exempt equity, the trustee might choose to take control of the sale. In such cases, the trustee will pay secured debts first, then provide you with your exempt portion, and distribute the remaining funds to unsecured creditors according to a court-approved formula.
Proceeds
After paying off your mortgage, the remaining proceeds from the sale of your home during bankruptcy in North Carolina are carefully handled based on the type of bankruptcy and your homestead exemption.
In most situations, these funds will go toward paying other creditors or administrative fees tied to your bankruptcy case. If you’re protected by a large enough homestead exemption, you may be entitled to keep a portion of the equity, but only after all secured and priority debts are covered.
Planned Payments
If you’re in a Chapter 13 repayment plan, selling your home could alter your financial situation significantly. As a result, you’ll be required to modify your payment plan.
Depending on how much equity you walk away with after the sale, you might be able to pay off your plan early or increase payments to creditors, potentially reducing your overall time in bankruptcy. Your trustee will help adjust your plan to reflect the new financial picture.
Itemized Payoff Statement
Before closing the sale, always request an itemized payoff statement from your lender. This document details any remaining balances, interest, fees, or penalties associated with your mortgage and must be factored into your final numbers.
By understanding exactly what’s owed, you can avoid last-minute surprises and ensure a clean, transparent transaction when selling your house during bankruptcy in North Carolina.
Bright Home Offer
There’s no need to delay. With rising interest rates and limited housing inventory, the timing may be perfect to sell. If you’re navigating bankruptcy, the fastest and least stressful solution is to work with a direct cash buyer like Bright Home Offer.
At Bright Home Offer, we specialize in buying homes during complicated financial situations—including bankruptcy—and we operate with full transparency. We’ll lay out the costs and expected outcomes of a traditional listing vs. our cash offer so you can make the best decision for your situation.
We’re local to North Carolina and care deeply about supporting homeowners through tough times. When you work with Bright Home Offer, you’ll not only get a fair offer but also peace of mind, knowing you’re working with professionals who prioritize your well-being—before, during, and after the sale.
The seasoned pros at Bright Home Offer have experience with sellers going through bankruptcy and have the solution you seek, providing you with a guaranteed closing date, charging no commissions or closing costs with no unpleasant surprises. If you’d like to avoid the work and out-of-pocket costs of prepping your house to list on the North Carolina real estate market, a direct sale to the cash investors at Bright Home Offer is the solution. The cash investors at Bright Home Offer never charge commissions, and there are no hidden fees. So you can put your wallet away and relax; you won’t even need to worry about showings when you make a direct sale to a cash investor from Bright Home Offer. For a no-hassle sale of your home during bankruptcy: a cash investor from Bright Home Offer will buy your house directly, as-is, for cash. Call Bright Home Offer at 984-983-4158.