MAY I SELL MY HOME BEFORE I FILE BANKRUPTCY?

Yes, the home may be sold before bankruptcy. It should be sold for fair market value and the transaction closed prior to filing bankruptcy. Any proceeds of sale should be deposited into a bank account separate from any other funds. The transaction will be disclosed in a statement of financial affairs and the proceeds of sale on deposit in the bank will be disclosed as an asset exempt from the bankruptcy estate.

Upon filing bankruptcy, the assets of the debtor become the assets of the bankruptcy estate, subject to available exemptions and exclusions. In the state of Colorado, there is a homestead exemption of $60,000 that protects equity ($90,000 for elderly or disabled persons). That same exemption can protect proceeds of sale for a residence, so long as they are segregated from all other funds and clearly traceable to the sale transaction.

If the sale of a home has not closed, as of the date of filing the bankruptcy, a court order declaring the home abandoned must be obtained before closing. This is an additional expense and may cause delay of the transaction.