Sell Your House During Bankruptcy in New York

Sell Your House in Bankruptcy in NY: The “Court-Approved” Cash Guide

Even if you’ve done it several times, selling a house is complicated. Bankruptcy is also complicated and relatively difficult. But what if you’re in the middle of bankruptcy, and need to sell your house? Is that even legal? The good news is that in most cases, you can still sell your house while filing for bankruptcy.

In this guide, we’ll go over what you need to know whether you’re filing chapter 7 or chapter 13, and what each one means for your sale. We’ll cover getting court approval and avoiding common mistakes. In the end, we’ll give you the information you need to find some clarity and direction in a complex process where you only have so much control.

Can I Sell My House While in Chapter 7 or 13 Bankruptcy in New York?

There is no doubt about it, you can sell your house during bankruptcy in the state of New York. That said, you’ll typically have to get court approval first, but that’s not a big deal in most cases.

The rules that will dictate how you go about it will depend on whether you’re in Chapter 7 bankruptcy or Chapter 13 bankruptcy. In both cases, the property becomes part of the bankruptcy estate, and that estate is then overseen by the bankruptcy court.

In Chapter 7, the appointed trustee will review the assets, including real estate. The automatic stay prevents any further action from creditors, but it also limits what you can do without approval. If the house is nonexempt property, or if it has nonexempt equity, the trustee might control the sale.

In Chapter 13, there’s a court-approved repayment plan. As a result, selling the home generally requires approval from the bankruptcy judge. This step is to ensure that all creditors get fair treatment.

The New York Homestead Exemption: Keeping Your Equity (2025 Limits)

The homestead exemption in New York lets you protect some or all of your home equity while filing for bankruptcy. The limit, however, depends on where the property is. The current exemptions range from $89,975 to $179,975, according to the county.

Equity over these amounts is considered non-exempt equity. Under the bankruptcy code, it can be used to pay creditor obligations.

How to Sell a Bankruptcy Property to Bob Will Buy It (5 Steps)

If selling a house were as simple as selling a car, things would be a lot simpler. However, Bob Will Buy It is a trusted local cash buyer that can streamline the whole process. Take a look at how quick and easy it can be when you partner with us to sell your house.

1. We Sign a Standard NY “Contract of Sale” (No Mortgage Contingency)

We’ll start with a standard New York contract of sale that reflects an agreed sale price. Since it’s a cash transaction, there’s no mortgage contingency and no lender delays. A real estate sales representative can coordinate details, but no listing is required.

2. Your Attorney Files the “Motion to Sell Real Property.”

Next, your bankruptcy attorney will file a formal motion to sell with the bankruptcy court. They’re officially requesting the court’s permission for the sale. This will include the offer and additional information the court may need. If you’re working with a real estate professional, they’ll help make sure everything is in order.

3. The 21-Day “Notice to Creditors” (Pursuant to Local Rule 6004-1)

Once the motion is filed, creditors are given notice and given a deadline to review the proposed sale and submit objections. If there are objections, they’re addressed before anything moves forward. With no objections, the sale can continue without issue.

4. The Hearing: Getting the “Order Approving Sale”

Sometimes there needs to be a short hearing. This hearing is scheduled so that the bankruptcy judge can review the motion. If the motion and the sale are approved, an order with that sale approval is issued. This formally clears the path to closing.

5. Closing at the Attorney’s Office: The Trustee Gets Paid First

Finally, at closing, the closing agent distributes funds according to the court rules. The proceeds for each party are deposited into appropriate bank accounts, and costs are paid. The first creditor to be paid is always the mortgage company or the trustee. to potential buyers and increasing your chances of a successful sale.

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Chapter 7 Strategies: Requesting “Trustee Abandonment” in NY

During a Chapter 7 bankruptcy, there’s a strategy known as “trustee abandonment”. This is the term used for when the trustee declares the property has no value left for creditors after accounting for liens, exemptions, filing costs, administrative costs, and so on. When a property is abandoned, it’s removed from the bankruptcy estate entirely. In these cases, control is ceded back to the homeowner.

Trustee abandonment is much more commonly used when a home only has minimal nonexempt property, or when selling all of that property wouldn’t create meaningful funds for the creditors.

Sellers interested in using trustee abandonment first need professional advice and a thorough review of all the numbers involved. If the court grants the abandonment, the homeowner may then be allowed to sell the property without court involvement. This means you can simplify the timeline while cutting out the stress, and you can walk away with more of the proceeds.

Chapter 13 Strategies: Using the Sale to Pay Off Your “Plan” Early

When you file Chapter 13 bankruptcy, selling your house can help shorten or fully satisfy your repayment plan. Since Chapter 13 is created around a structured monthly payment schedule, the sale proceeds need to be approved by the court.

In a lot of cases, though, the funds are applied to creditor balances automatically instead of treated initially as discretionary income. Court approval ultimately determines how any nonexempt proceeds impact your remaining obligations.

A successful home sale can cut future monthly payment requirements or even cause automatic payments to terminate sooner than scheduled. For homeowners in areas like Poughkeepsie, a cash sale with the court’s approval can make things far simpler than otherwise.

New York Transfer Taxes: Do You Still Have to Pay Them?

Unfortunately, filing for bankruptcy doesn’t get you out of transfer taxes when you sell your home. Even during bankruptcy proceedings, transfer taxes must be paid before proceeds are distributed. The closing agent handles the transfer tax deductions as part of the court-approved sale process.

To be extra prepared, find out your assessed value, then determine what your actual transfer tax will be. Since it’s coming out of your proceeds, knowing how much is handy. However, just knowing they’re coming can get rid of a potential surprise at closing.

Listing with a Broker vs. Selling to a Cash Buyer in Court

Listing your home during a bankruptcy can be done, but it can drastically increase the complexity of the sale. This also means the sale will naturally take much longer. The real estate agent will price the home, market it, manage showings, and vet a financed buyer. You’ll still need court approval, and the realtor commissions are going to eat into your proceeds. If there are liens, buckle up for more delays.

Selling to cash buyers is much different. A cash buyer comes to you ready to make an offer and close. They don’t rely on mortgage lenders, so the typical contingencies and delays related to lender funding just aren’t applicable. You’ll still need court approval, but local real estate investors will create an offer that is clear and tailored for the court’s needs. This can be the ideal strategy for homeowners in Dutchess County who need to sell fast.

Frequently Asked Questions About NY Bankruptcy Sales

Will I have to attend the hearing in the Southern or Eastern District Court?

In most cases, homeowners don’t even need to attend the hearing. Your bankruptcy attorney will appear on your behalf. Your attendance is only needed if the judge asks for clarification or if your creditors have raised objections.

Can I sell if I am behind on my mortgage but not in foreclosure yet?

You can still sell your house if you have late or missing mortgage payments. The automatic stay stops foreclosure activity, and court approval lets the sale move forward while still addressing the lender’s claim.

What happens if the house sells for more than I owe the court?

In cases where the sale generates proceeds in excess of what’s needed for creditors and costs, the court will determine how that money is distributed. Any exempt equity may be returned to you after distribution.

Conclusion

Selling your house during bankruptcy might feel like just one more stressful task on the pile, but we can help make it easy. With a fair, transparent offer crafted for rapid court-approval, you’ll be ready to sell fast, no matter what chapter you’re filing under. If a quick, easy sale sounds like it could help, reach out to Bob Will Buy It, and let’s talk.