If I Filed Chapter 13 Can I Buy or Sell my Home in Ohio?
You can buy or sell a home while under Chapter 13 bankruptcy. However, you will need to get authorization first.
Filing for Chapter 13 bankruptcy involves turning over some of your financial decisions to the bankruptcy trustee. During the bankruptcy period, your property becomes part of the bankruptcy estate. The trustee has the duty to oversee that estate and approve major financial decisions involving it.
When you want to buy or sell a home in Ohio, while under Chapter 13 proceedings, the trustee will need to authorize it.
Selling a Home
If you decide you want to sell your home, you need to submit appropriate paperwork to the trustee. This includes a motion to sell that outlines the sale price, value of the home, and discloses the name of the potential buyer. The motion will also need to disclose how you propose the proceeds will be distributed after the sale is complete.
In most case, as long as the property is being sold for fair market value and it is an arms-length transaction, the trustee will authorize the sale.
After you sell the home, you will need to submit a copy of the closing statement to the trustee. This will include the final sales price, closing costs, balance left over after settling the mortgage, and any proceeds remaining.
The trustee will order payments according to the proposal you originally submitted in the motion to sell. It can include making a down payment on your new home, paying moving expenses, or possibly paying portion of the net proceeds into the plan.
Buying a Home
Buying a home can be more complicated while still in Chapter 13.
You must obtain permission from the trustee to incur debt. You will need this permission to get a mortgage approved. Trustees will often approve this if you've been making payments for some time, are not past due on the plan payments, and have the ability to keep making those payments.
However, buying a home while under Chapter 13 involves more than just getting the trustee's approval.
It may take time to find a lender willing to give a mortgage loan to someone in Chapter 13. Some lenders will make the loan, but at a high interest rate. You need a lender willing to make the loan at a reasonable rate.
Gathering the down payment can also be a challenge. If you save the money up, the trustee will want to know where it came from. You may find the trustee increasing your bankruptcy payments, especially if you have a new source of income.
If a family member or friend gives you the money as a gift, that could be acceptable to the trustee. However, a personal loan is not a good option because it involves someone giving your credit, which must be approved by the trustee.
Due to these limitations, many choose to wait until after exiting Chapter 13 before purchasing a new home.
It is always a good idea to talk with your bankruptcy attorney before you approach the trustee. That way you can be sure that you are not violating the bankruptcy rules. Attorneys Brian Wood and Katy Brewer of Wood & Brewer are here to help answer your questions about bankruptcy and your options. We welcome you to contact us today and take advantage of our free consultation.