When filing for bankruptcy with the assistance of an experienced bankruptcy lawyer, debtors often ask whether they should sell assets off prior to filing for bankruptcy or after filing for bankruptcy. Generally I tell them that you should wait to transfer assets out of your name until after the bankruptcy filing. This is because all assets transferred within one year of filing must be reported on your bankruptcy petition. Additionally, a bankruptcy trustee may look back even further at assets transferred if they believe there has been some fraudulent activity going on to avoid your creditors. Therefore it is generally best to wait until after your bankruptcy filing to transfer an asset.
However, the other day I was in court at a clients 341 meeting of creditors and the bankruptcy trustee asked my client whether he intended to sell his home after filing for bankruptcy. He answer he would like to keep it, however he wasn’t sure if he would be able to keep the home so he may have to sell it. The trustee responded that in that case he was going to leave this clients case open for a year to see if the property was going to sell. This upset my client very much as well as myself because I have never heard of such a thing.
Apparently there was a new ruling in the 9th circuit that the trustee referenced. In this case, the court ruled that a homestead exemption would not be applied to a home that was sold after a bankruptcy if the equity proceeds were not used on another home. There have been other decisions which are contrary to this ruling which I think is ridiculous. In this scenario a trustee could hold out and wait to see if a home is eventually sold in order to go after proceeds. Trustees are supposed to wrap up cases in an expeditious manner and leaving a case open is contrary to this rule. Further, debtors cannot predict the future and when they might need to sell a home. The rule that I will take away from this is that if a trustee asks whether you intend to sell your home in the near future and you are not sure, it is probably best to just so no, you have not plans to sell at this time.
If you you still curious whether you can sell your home after filing bankruptcy, give Symmes Law Group a call at 206-682-7975 to learn about your options with experienced bankruptcy professional.