Homestead Sale in Chapter 7

Chapter 7 debtors frequently ask if they can sell their house after filing bankruptcy and whether the court will provide an Order that their house is exempt homestead for the benefit of a title company writing title insurance. If you claim your residence as an exempt asset on your bankruptcy petition the trustee has a limited time after filing and your meeting with the trustee to challenge the claimed exemption. If the trustee does not challenge your homestead, or if the trustee challenges the exemption and the court upholds the exemption, then your house is exempt and may be sold. The exemption of the homestead, whenever finally determined, dates back to the date of filing bankruptcy.

Bankruptcy courts in Florida are reluctant to issued Orders stating the homestead is exempt when the trustee fails to make a challenge. Courts expect attorneys for the title companies to know the law and know when the homestead is exempt as a matter of bankruptcy law and procedure. The bankruptcy judges believe it is not their job to issue "comfort orders" to title companies, prospective buyers, or other parties who may be involved in the sale and purchase. The bankruptcy debtor sometimes must educate their real estate agent or title insurance company in order to close the sale of their homestead after filing Chapter 7 bankruptcy.

posted by Jonathan Alper, bankruptcy and asset protection lawyer, Orlando, Florida