Chapter 7 and Chapter 13 handle the house differently
The chapter you filed decides who controls a sale.
| Chapter 7 | Chapter 13 | |
|---|---|---|
| Who decides to sell | The trustee | You, with court approval |
| Legal basis | 11 U.S.C. 363(b): sale after notice and a hearing | 11 U.S.C. 1303 gives you the trustee’s 363 sale powers |
| What triggers a sale | Non-exempt equity the trustee can use to pay creditors | Your choice, often to fund or finish the plan |
| Where the money goes | Liens, costs, your exemption, then creditors | Liens and costs, then as the plan or the court order directs |
In both, the purchase agreement should make the sale subject to court approval, and the title company will want the signed order before it closes.
The automatic stay and a scheduled sheriff sale
Filing bankruptcy triggers the automatic stay in 11 U.S.C. 362. It stops any act to obtain possession of property of the estate and any act to create, perfect or enforce a lien against it. That includes a foreclosure sale. The Summit County Sheriff lists a bankruptcy filing as one of the reasons a scheduled sheriff sale is stopped.
The stay isn’t permanent. A lender can ask the court for relief from it, and a case that’s dismissed ends the stay. If a sheriff sale is already set and you’re weighing your options, see selling before a sheriff sale, and talk to a bankruptcy attorney before you do anything.
How much equity Ohio lets you keep
Ohio uses its own exemptions in bankruptcy, and the homestead exemption is the big one for a house. Under R.C. 2329.66(A)(1)(b), as adjusted, it protects $182,625 of equity in your residence for cases filed from April 1, 2025 through March 31, 2028. The prior figure was $161,375. Your attorney applies the figure in effect when you filed.
A simple way to see where you stand:
- Start with a realistic sale price.
- Subtract the mortgage payoff, other liens and selling costs.
- Subtract your homestead exemption.
If the answer is zero or below, a Chapter 7 trustee usually has little to gain from selling. If it’s well above zero, expect the trustee’s interest, and in Chapter 13, expect that equity to matter in your plan.
Getting the court’s approval to sell
A sale outside the ordinary course needs “notice and a hearing” under section 363(b). In practice, your attorney (in Chapter 13) or the trustee (in Chapter 7) files a motion to sell that describes the buyer, the price and the terms, and creditors get a chance to object.
A few details come up often:
- Co-owners. Section 363(h) lets a trustee sell a co-owner’s interest along with the debtor’s when dividing the property isn’t practical, and section 363(i) gives a spouse or co-owner the right to buy at the sale price before the sale closes.
- Disclosure. Ohio’s disclosure form isn’t required for a transfer by a trustee in bankruptcy, under R.C. 5302.30.
- Timing. The closing date follows the order, so build in time for notice and any objection period.
Liens, payoffs and selling after the case closes
At closing, the title company pays the mortgage and any other liens from the proceeds, as the approval order directs. Section 363(f) allows a sale free and clear of other interests only in the situations it lists, so a lien that won’t be paid in full needs to be addressed in the motion. That’s one reason a short sale inside bankruptcy takes longer.
Once your case is closed, the bankruptcy estate no longer controls the house, and a later sale generally goes through like any other. Ask your attorney whether that’s the case for you before you sign anything, since a dismissed case, a converted case and a discharged case are each treated differently. If the house is worth less than the mortgage, see selling a house worth less than you owe.
The bankruptcy courts for this area
Cases from Summit, Stark, Portage and Medina counties are in the U.S. Bankruptcy Court for the Northern District of Ohio, which has offices in:
- Akron: John F. Seiberling Federal Building and U.S. Courthouse, 2 South Main Street
- Canton: Ralph Regula Federal Building and U.S. Courthouse, 401 McKinley Avenue S.W.
Your attorney and the trustee will file and track the sale there. If you’re behind on the mortgage but haven’t filed, selling when you’re behind on mortgage payments covers options outside bankruptcy. When your attorney is ready for an offer to put in a motion, send us the address.
