Selling Your Home During a Chapter 7 in Texas? Be Careful, the Devil is in the Details.

The state of Texas has a generous homestead exemption. This means that as a resident and homeowner in Texas, when you file bankruptcy, Texas allows you to exempt a certain amount of equity in your home. If you choose to claim this state exemption and you want to sell your home, the timing of this sale is very important.

While you are legally allowed to sell your home after your homestead exemption has become final or after receiving your bankruptcy discharge—it is in your best interest to wait until your case has been officially closed. The bankruptcy discharge releases you from your legal obligation to repay the dischargeable debts you owed when your Chapter 7 bankruptcy case was filed. When your case is closed a final decree is issued. Before your case is closed, any non-exempt assets are under the control of the bankruptcy trustee and the trustee can seize those non-exempt assets.

When is a chapter 7 bankruptcy case closed?

Unfortunately, there is not a hard and fast rule on when a bankruptcy case will close. It is up to the bankruptcy court to decide when a bankruptcy it is closed. If you have assets in a Chapter 7 case, it could be 4-6 months after your discharge before your case is closed. In some cases, it could take longer. If you have a good bankruptcy attorney, he or she will do his/her part to move the case along and will keep you informed of when the final decree is issued. It is important to discuss with your attorney any plans you have to sell any assets.

If you sell your home after your discharge but before your case is officially closed, you must re-invest the proceeds from the home sale into the purchase of another home within six months (180 days) of the sale or the bankruptcy trustee can demand that you turn over that money which will then be distributed to your creditors. If you wait until after your case is officially closed, you do not have to reinvest the proceeds of the home sale into another home and you can choose to do want you want with that money.

While it may seem easy enough to sell your home and re-invest the proceeds of that sale into another home within six months things can get in the way. The purchase of the new home could be delayed or fall through for various reasons.

Bankruptcy can be complicated. It is important to hire an experienced bankruptcy attorney who will advise you on the ins and outs of your particular case and guide you through the entire process. There are many attorneys out there who handle bankruptcy cases and an assortment of other legal services. An inexperienced attorney can end up causing delays and other unpleasant issues in your case. Look for an attorney who represents clients in bankruptcy on a daily basis and who maintains an A rating with the BBB.

For a free consultation with Attorney Robert Vanhemelrijck call our office at (210) 209-9088 or send us an email through our website. Mr. Vanhemelrijck has personally handled the filing of over 1500 Consumer and Small Business Bankruptcy cases in the Western District of Texas, San Antonio Division.