Legal Question in Bankruptcy in California

There are certain variables such as the location of the real property and the type of ownership. In California, in general, the answer is, "yes, the property can be sold." However, you don't have to fear! Filing for chapter 7 bankruptcy (which can involve liquidation) does not mean that the filer's home will be sold (by the Trustee-- not the Court). The Trustee (an attorney appointed by the Department of Justice) can consider selling the property only if available equity cannot be exempted by the debtor (employing state and/or sometimes Federal law that protects property from creditors and in bankruptcy). Even if the relatively generous homestead exemptions available in California do not protect all equity, the home would not likely be sold if: after pay off of liens, the costs of sale and the Trustee's commission, there would be nothing or little to pay to the creditors, who need to file claims for the proceeds. We routinely file for homeowners and liquidation of a home is relatively rare, especially in this upside-down market of 2010. The sister's bankruptcy attorney will have warned her of the possibility of liquidation. Your friend should seek independent legal counsel.

Important disclaimer:

Unilateral written communications may be incomplete or misconstrued. This answer is not legal advice and it is based upon the limited and partial information provided in the question. This answer is general in nature. It is strictly opinion and legal opinions differ and some may be incorrect. This reply does not create legal representation and does not create an attorney-client relationship (or retainer). The information herein should not be relied upon in determining whether or not to take or refrain from any action. Only an attorney that agrees in writing to represent a person is capable of giving legal advice in response to a question. Such a hired or retained attorney is in a unique position wherein he or she can clarify the questions, determine and avoid conflicts of interest and gather all the information necessary to give an informed answer. A retained attorney is in a unique position to follow up on their legal advice and adapt/correct it as circumstances change or new information or knowledge comes to light. All individuals are urged to retain competent legal counsel before filing for bankruptcy. Errors in completing and filing a bankruptcy petition can have disastrous consequences.