Why Selling During Bankruptcy Is on the Rise
As financial issues due to circumstances beyond homeowners control – change their ability to pay creditors, they find they have no option but to claim bankruptcy, which can stop a foreclosure on their primary residence. Bankruptcy filings jumped 13 percent in the 12 months ending March 2025—the sharpest annual increase since the pandemic, according to the Administrative Office of the U.S. Courts.United States Courts At the same time, tight inventory has kept home prices surprisingly resilient; Redfin reports a national median sale price of $438,357 in April 2025, up 1.2 percent year-over-year.Redfin
Understanding Bankruptcy, Equity & the Automatic Stay
| Chapter | What Happens to Your Home | Key Takeaway for Sellers |
|---|---|---|
| Chapter 7 (Liquidation) | The trustee may sell non-exempt property, including your house, to repay creditors. Homestead exemptions protect only a portion of your equity.Nolo | Court permission is mandatory. Move quickly if you want input on the sales price. |
| Chapter 13 (Repayment Plan) | You keep the home while making 3–5-year payments, but any sale still requires a court-approved Motion to Sell and updated repayment plan. | A well-priced sale can pay off the plan early and shorten bankruptcy. |
Step-by-Step Guide to Selling Your House During Bankruptcy in Michigan
- Talk to Your Attorney First
Court approval is non-negotiable, and a misstep can cost you your discharge. - Order a Professional Valuation
A recent CMA or appraisal demonstrates to the trustee that you’re selling at fair market value—important in a market where Michigan prices remain competitive. - File a Motion for Leave to Sell
Your attorney (or trustee in Chapter 7) submits a motion outlining sale price, agent commissions (if any), and how proceeds will be distributed. Creditors have the right to object.Allmand Law Firm, PLLC - Add a Bankruptcy Contingency Clause
Every purchase contract must state that closing is contingent on bankruptcy-court approval. This protects both you and the buyer. - Close & Disburse Funds
- Chapter 7: Trustee pays liens, gives you any exempt equity, and distributes the balance pro-rata to unsecured creditors.
- Chapter 13: Net proceeds go toward your repayment plan, which may allow an immediate discharge once creditors are satisfied.
- Document Everything
Request an itemized payoff statement so no undisclosed fees emerge after closing.
Why a Direct Cash Sale to Speedy Sale Home Buyers Makes Bankruptcy Easier
Traditional listings stretch 60–90 days in many markets, exposing you to financing fall-throughs and inspection delays—problems the court may not tolerate. By contrast, Speedy Sale Home Buyers buys houses as-is for cash, with:
- No agent commissions or closing costs
- Flexible closing dates that align with the court’s approval timeline
- Proof-of-funds letters your trustee can review immediately
Because we’re local investors, our offers reflect Michigan pricing dynamics, not national averages. And our transparent side-by-side comparison shows exactly how much you’ll net versus a traditional sale, so you and your attorney can make an informed decision.
Frequently Asked Questions
Can I sell my house while under a Chapter 13 repayment plan?
Yes. You must file a Motion to Sell and obtain written approval from both the trustee and the bankruptcy judge before closing.
Do I need court permission for a Chapter 7 sale?
Absolutely. The trustee controls the asset; without court approval, the sale won’t record, and you could jeopardize your discharge.Nolo
What happens to my equity after the sale?
Up to your state’s homestead-exemption amount comes to you. Any excess is distributed to unsecured creditors (Chapter 7) or applied to your repayment plan (Chapter 13).
How long does court approval take?
Timelines vary, but many attorneys recommend allowing 30–45 days between contract signing and closing to accommodate notice periods and hearings.Jeff Kelly Law Offices
Can a cash offer shorten my Chapter 13 plan?
Yes. If sale proceeds pay the remaining balance due to creditors, the trustee can request an early discharge, ending your bankruptcy months—or even years—sooner.
A Unique Insight: Timing the Market vs. Timing the Court
Most guides focus only on legal hurdles, but seasoned investors know the intersection of low inventory and rising filings creates a narrow “equity window.” Waiting until discharge may mean selling into a cooler market or losing leverage with the trustee. By acting while prices remain elevated—and by using a cash buyer who aligns with court timelines—you maximize both speed and net proceeds.
Next Steps
Selling a home during bankruptcy is legal, doable, and—when executed correctly—one of the fastest ways to protect your equity and achieve a true financial reset. The key points to remember are:
- Court approval is required for any home sale during bankruptcy.
- A well-structured Motion to Sell and clear payoff statement keep surprises at bay.
- Direct, as-is cash offers eliminate the financing and inspection risks the court dislikes.
- Partnering with a local expert like Speedy Sale Home Buyers streamlines every step—from valuation to closing—while putting more money in your pocket.
Ready to explore a no-obligation cash offer? Call (313) 552-8608 or fill out our quick form today. Let Speedy Sale Home Buyers shoulder the paperwork, satisfy the court, and give you the fresh start you deserve.