Many debtors considering bankruptcy are also considering selling their home because they can no longer afford the payment or simply because they want to reduce expenses. When deciding if it is beneficial to you to sell your house before or after bankruptcy there are a few things you need to consider:
- Can you afford the house? If you can’t afford the payments on your home, you may want to consider surrendering the house to the mortgage lender in bankruptcy. The benefit of surrendering your house in bankruptcy is that you will be released from any obligation to pay the mortgage after your bankruptcy discharge.
- Do you have equity in your house? If you don’t have any equity in the house or if you are already “underwater” you may benefit from surrendering the house in bankruptcy or trying to sell the house before you file for bankruptcy if you think you can get a buyer. However, if you do find a buyer you may still end up owing money on the mortgage if you are “underwater.” Even if you mortgage lender approves a short sale, the process is complicated and will require lots of time and energy. Time and energy better spent preparing for your bankruptcy filing and preparing for life after bankruptcy. And that takes us to our last point.
- Do you have the time and energy necessary to sell your home before filing for bankruptcy? Once again, even if you have equity in the home, selling the home before bankruptcy could be difficult or even put your other assets at risk. For example, if you are facing a wage garnishment or lawsuit, you may not want to waste time trying to sell your home before filing bankruptcy. In the case of wage garnishments and lawsuits a delayed bankruptcy filing can cost you thousands of dollars.