A Chapter 13 debtor may not sell or dispose of property that he or she owns when a Chapter 13 Bankruptcy case is filed unless approval is first obtained from the Bankruptcy Court. Remember that property includes real property such as a home and personal property such as a car, furniture, jewelry or a mobile home. The way that permission is obtained is by having your attorney file a motion to sell property. Unfortunately there is no shortcut to obtaining this permission.
REQUIRING A MOTION TO SELL HELPS REDUCE FRAUD
A problem that sometimes occurs is a debtor will try to sell property at less than fair market value or sell the property to a friend or insider. The motion will set out who the buyer is and if there is any relationship between the debtor and buyer.
The motion will set out the selling price and other terms of the purchase. Sometimes a debtor will try to sell the property at a below market price and then receive some money on the side from the buyer.
THE MOTION WILL ALLOW ANY CREDITOR TO OBJECT TO THE TERMS
Usually, a creditor has a good idea of the value of the property to be sold. If the price or terms are not fair, the creditor can object to the sale. If an objection is filed, a hearing will be held and the Judge can then decide if the sale price and terms are fair to all of the creditors.
OTHER PERSONS CAN COME TO THE HEARING AND OUTBID THE BUYER
The threat of a new buyer coming will also keep the debtor honest. Once the motion to sell is made, the debtor may be forced to go through with the sale to a buyer that the debtor did not intend to buy the property.
SAFEGUARDS BUILT INTO THE SYSTEM WILL SLOW DOWN A SALE, BUT, THE REQUIREMENTS PROVIDE FOR A MORE TRUSTWORTHY PROCESS
Sometimes it seems that the rules on how a debtor can sell property are cumbersome. However, the fact is that the bad actors have forced rules to make sure that a debtor does not dispose of property improperly. The rules have to cover all sales.
A CHAPTER 13 DEBTOR SHOULD NEVER SELL OR DISPOSE OF PROPERTY WITHOUT FIRST CONTACTING AND DISCUSSING MATTERS WITH THEIR ATTORNEY.
If you have questions about your rights in a Chapter 13 bankruptcy case, contact me, Nathan Davis, to discuss your options. Of course, if you have your own attorney in a Chapter 13 case, you should contact your attorney.