Selling a house before Bankruptcy

       Perhaps you are considering filing for bankruptcy and you are not sure if your home will be safe or not. You may not be aware that your house can be considered part of your assets and can be sold to collect money to pay your creditors. You may want to consider selling your house before bankruptcy to protect your assets.If you reside in the home with your family it may be possible to postpone selling the home, giving you an extra year or so to get things in order. If you own the home jointly, then the house may be sold and your half of the money would go to your creditors and the other half to go to the other owner.

       If you have a trustee for the home and it is not possible to sell the home right away, the trustee can have a charge against the house for a period up to three years. During this time frame, if the value of the house goes up, the trustee can use the equity to pay off debts. In the event that the house does sell, the extra money from the value of the home will still go to the trustee to pay off the previous debts.
You can also have a provision in the bankruptcy that will allow someone in your family, such as your spouse to purchase the home, allowing you to remain in the house and keep the house out of danger from the bankruptcy.

If you sell your house within five years prior to the bankruptcy and the selling of the home is not listed as a provision, the trustee can void the transaction and change the deed to the home back to your name. This will allow the trustee to then sell the home to collect money to pay your creditors, from the sale of the home.

      There is a relief period where you can negotiate with your creditors and work out something to keep your house while working out an arrangement with them. In many states, the equity in your home, up to the amount of $125,000 falls exempt, where the creditors can not force you to sell it to pay them. Even though you would be exempt from selling your home in this case, you will still be responsible to pay your debts.
Not all cases will be void if you sell your home to your spouse prior to bankruptcy. There have been cases where arrangements were made prior and were found to be successful. It is a fascinating fact that many of these cases, the trustee overlooked the assets of the persons spouse. This does not conclude that this is an ethical or safe practice to do, especially when many states have programs or provisions to protect your home and keep your creditors from selling it.

     Your best bet would be to seek the advice of a professional who can help you sell your home prior to bankruptcy with out the risk of voiding the deal.