Legal Question in Bankruptcy in California

Sale of a house in foreclosure during a chapter 7 bankruptcy

Our house has been in foreclosure since February 6 '04

We just recieved a notice of sale on May 28 '04. We filed a chapter 7 bankruptcy last week so that should stop things for a little while. Last year we re-financed our loan and the house appraised at $360,000. We now have the house up for sale and we're asking 459,000.We owe $360,00 to our lender and we estimate the Realtor commission around $28,000, We also have a home improvement loan secured by the house for $ 9,400.(all totaled $ 397,000). If we can sell the house for the asking price of $459,000 this would leave a surplus of $ 62,000. Under California law our equity exemption would be $75,000. So,My question is, if we sell the house and it closes before the bankruptcy is finaled will we still be able to keep the

$62,000? If it sells After the bankruptcy is finaled would we still be able to keep the $62,000?

Thank you very much


Asked on 5/17/04, 12:25 am

1 Answer from Attorneys
Gary Fraley California Bankruptcy Attorneys

Re: Sale of a house in foreclosure during a chapter 7 bankruptcy

If you sell and close before the bankruptcy is discharged (even with court approval)the asset no longer is exempt and you can lose it. Even if you have a declared homestead the funds are only exempt for 6 months and only keeps the exemption if you put all the money in the purchase of a new home (highly unlikely). If the money is temporarily protected and loses its exempt status the exemption is wiped out clear back to the date of filing. Simply put, don't sell until the bankruptcy is discharged. What you should do is find a buyer now but close the escrow the day after the bankruptcy is discharged. No court approval is needed for a sale after the bankruptcy is over.

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Answered on 5/19/04, 2:09 am


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