Legal Question in Bankruptcy in North Carolina

This question sounds like the former wife who has been told by the debtor that he cannot sell the home for some period of time because of his bankruptcy. The answer is now. There is no reason a debtor in bankruptcy, either 7 or 13 cannot sell his home. If it is a Chapter 7, he must make sure that the Trustee in bankruptcy has no interest and should seek an abandonment if the closing occurs prior to the closing of the case. The trustee only has an interest if the 1/2 net equity is more than the debtor can exempt under applicable exemption laws. You have to look to state law to see if it has opted out of the federal exemption schedules ($25,000 for real estate used as a residence). If the state has not opted out, then the federal exemption applies to the $17,500 equity and it is exempt. Thus the trustee has no interest. If the state exemption applies then you have to look to the amount of equity the debtor is allowed to retain. If the state allows less then the $17,500 then the trustee will take the difference from the closing. The co-owner takes the whole $17,500 other 1/2 equity free and clear of the trustee and the debtor. If the case is not closed or the trustee has not abandoned the property, then the trustee will have to sign off on the deed. Of course, if the debtor lied about the value or the amount of the debt secured by the property, then sale would expose the surplus equity to not only the economic disadvantage of the debtor but could result in a lot more trouble for him. The property can be sold in a Chapter 13 with court permission. Depending on the plan, some or all of the debtors equity may go to the trustee for distribution to creditors. The point is, that bankruptcy does not block sale. The issue of economic disadvantage is larger than just bankruptcy. There is the issue of capital gains on the sale, the seller has to live in the house 2 out of the last 5 years to avoid tax. Delay or advancement of a sale can have tax consequences.