Any benefit by selling house before bk filing?

[betterlife13]

Is there any benefit to be gained by selling our house before filing (other than better post bk credit score), if we walk away with no money after mortgages paid?

We could possibly end up with as much as $5,000, but our wildcards will be used up on our (paid off) vehicles, so we couldn't keep any of that to rent another place, move or otherwise, right? I am thinking the downside would be that we close before filing, have to move and have no money to rent a place or to get moved vs. filing and saving up some money before the discharge and foreclosure (we're in a non-judicial foreclosure state).

If there is something I am missing, will someone please let me know? I've learned a lot from the forums, but you all know so much more, and I'm simply not able to see a benefit to be gained, especially since this potential quick sale would involve an equally quick move...

Thanks in advance!

[justbroke]

Yes there is and it's precisely what you elude to in your posting. It would certainly make things cleaner and you could possibly exempt the proceeds. That strategy could allow you, based on your post-bankrutpcy credit history and financials, obtain a new mortgage on a new home in just 2 years from discharge.

However, I'm concerned that there will be only $5,000 in proceeds. That is such a small amount that I would think that you may have trouble selling or obtaining your asking price, paying the commissions and other closing costs, and then leaving with money in your pockets. If it is that tight and you would have trouble getting into a new place -- due to lack of savings -- you should really consider the financial impact. Think of it as not having that $5K at all. Think about your life over the next 2-3 years. It's okay to plan and look forward towards future ownership, but don't do so if your fresh start will be nothing more than a continuation.

[betterlife13]

Yes there is and it's precisely what you elude to in your posting. It would certainly make things cleaner and you could possibly exempt the proceeds. That strategy could allow you, based on your post-bankrutpcy credit history and financials, obtain a new mortgage on a new home in just 2 years from discharge.

However, I'm concerned that there will be only $5,000 in proceeds. That is such a small amount that I would think that you may have trouble selling or obtaining your asking price, paying the commissions and other closing costs, and then leaving with money in your pockets. If it is that tight and you would have trouble getting into a new place -- due to lack of savings -- you should really consider the financial impact. Think of it as not having that $5K at all. Think about your life over the next 2-3 years. It's okay to plan and look forward towards future ownership, but don't do so if your fresh start will be nothing more than a continuation.

Thanks so much for your reply - I didn't want to get too detailed in my original post, but here is what is going on... We just learned that a sister (who I've met a couple of times) of a friend lives in another community and has their home under contract, and closes on it within a month. Our friend does not know we will be filing for BK, by the way... The friend's sister and her family specifically want to be in our neighborhood and are about to make an offer on a home here. Of the two homes they are considering, they are priced at 20% more than the price that we could directly sell to them (without a realtor), giving them a good deal, getting our mortgages paid off, and probably end up walking away with about $5,000. Our home has all the features they are seeking, just is not in the same move-in ready condition, since ours needs new carpeting (which we cannot afford to replace, but they could afford to), but otherwise would be a great deal for them. I was just wondering if this possibility could benefit us -- if so, I could reach out to the friend's sister and let her know that we would sell our house, even though it is not on the market.

Our biggest issue is that we planned to file next week, and I know they need to close soon, so I am just concerned that if we sold before filing and needed to get out on such a short timetable, would the benefit of the better post bk credit rating be negated by the need to move quickly (thus not saving up more $$), and us possibly running into issues due to disposing of an asset just prior to filing, not to mention any small amount we netted being somehow "called back" to pay our unsecured creditors? I'm just not sure if the benefit would outweigh the negative, since it would mean us having to move quickly, when we likely may not have enough of a cushion (which the post bk filing to discharge period would allow us).

[justbroke]

If you made money on the sale, then you would need to make sure that there is an exemption to cover it. Exemptions are State specific. You would not be in any trouble if you received "market value" for your property. However, you would need to let the sale "season" somewhat! I don't know the specifics, but the sale would need to be completely consummated with the new title (deed) being recorded and any other statutory period expiring. Transfers to insiders within 1 year are especially scrutinized. I do not think the friend's sister is an insider, but you don't want any appearances of issues. You would still probably need to wait at least 90 days from the time of a transfer of property anyhow.

If you want to sell, I would do this. When you are getting your free consultations with various attorneys in your area, make sure you ask this specific question. Transfer of property on the eve of bankruptcy is a sticky subject.

Again, I would weigh the financial impact on your "fresh start" with any other transfer issues. These two things will be your biggest headaches!

[betterlife13]

Many thanks, JB! You are awesome and so fast with your replies. I don't think the little $$ benefit (if any) and potentially better credit score is worth the headache/hassle/stress of waiting, as we are already going crazy, almost literally. If we waited, just more headaches, since no doubt by then the unsecured ccs would file suit before any sale could "season." We just want this to go smooth and get it behind us. Truly, the thought of buying another house at this point doesn't really appeal to me -- unless it were a thatch roofed model under swaying coconut palms that we could get for a song and peacefully live out the rest of our lives, debt free.. LOL! We did find an atty we trust and feel comfortable with, so we're off and filing next week. Thanks again!!