Question about house being included

[nomoneynomore]

When a house is included in a Ch 7 and the bank sells it, where does the money go? Does the bank get to keep the money or is it divided up among all the creditors included in the bk?

This is in Kansas.

Thanks

*I'm posting this for a friend*

[starr4law]

Boy, this is pretty vague Well, it depends if there is equity in the home to begin with. If a homestead exemption is available, a debtor could protect up to that amount in their bankruptcy in theory, and when the house is sold, they would receive those funds. However, this seldom happens. Since it is likely that no one would buy the home when the lender sells it, the lender would just bid it's own interest in the home (exactly the amount that is owed) and there would be no money left over. With foreclosure running rampant, there are not many buyers out there to bid to enable the debtor to have access to that "equity" that might be there. Even if the lender did sell it to a private bidder, remember that the lender is allowed to get back all kinds of fees they incurred during the sale like attorney costs, closing costs, etc., etc.

[nomoneynomore]

They aren't wanting any money out of it. They just want to make sure the mortgage lender will actually get their money out of the house. I think the issue is they don't want the bank to have to go to the expense and trouble of selling it only to have to share the money with all the other creditors and not get all their money back. I think it's a guilt thing

The tax office has the house valued at $126k, the realtors assessed it at $120k and they owe $117k. Does that help any?

[starr4law]

Oh, I see. No, the lender will just get the home back and what they do with it is unknown. After your friend is divested of their interest, and the bankruptcy has released it from the bankruptcy estate (assuming that the Trustee doesn't actually sell the home in your district - even if they do, the only difference is that the Trustee will take a fee before giving the lender the rest of the money), the home will go on the market and probably sit. If there is a second mortgage, they will be treated like an unsecured creditor and get nothing.

[nomoneynomore]

Thanks so much!! That is what I told her too, but then got to thinking maybe I was wrong. Our house wasn't included in our bk, so I wanted to double check.