How to Sell Your House During Bankruptcy in Pensacola

Anne Laurenzi, owner, Take Flight Home Buyers

If you are a homeowner facing bankruptcy, it’s crucial to understand that your home will become part of the bankruptcy estate, which includes all your property and assets. Recent data from October 2022 shows a significant twenty-seven percent increase in chapter 13 bankruptcy filings compared to the previous year. Overall, bankruptcies across all chapters have risen by seven percent, mirroring the seven percent increase in inflation. This trend highlights how many homeowners are struggling with overwhelming debt, leading them to consider bankruptcy as a solution to financial difficulties beyond their control. By filing for bankruptcy, individuals may be able to halt a foreclosure on their primary residence. 

Homeowners in Pensacola facing bankruptcy often consider selling their houses to alleviate some of their financial burdens. In chapter 13 bankruptcy, individuals with secured and unsecured debts under $2,750,00 may be eligible. On the other hand, chapter 7 involves a liquidation process where the trustee liquidates assets to repay debts based on the individual’s income, debt amount, and repayment capacity.

While the rules for the process may differ based on the type of bankruptcy you file under, and numerous factors influence the final determination, most homeowners can indeed sell their house during bankruptcy in Florida. Continue reading as we delve into the details of how to sell your house in Pensacola. Kindly remember that this content serves for informational purposes only and does not constitute financial or legal advice.

Court Permission

If you’re considering selling real estate while going through bankruptcy in Pensacola, obtaining court permission is a crucial step in the process. This involves submitting a motion to the court, a formal request that must be meticulously prepared. The motion should comprehensively detail several key aspects of the sale, starting with the proposed sale price. This figure must be reasonable and reflective of the current market conditions in Pensacola to gain the court’s approval.

Additionally, you need to outline your intentions for the sale proceeds in the motion. This includes specifying how you plan to allocate the funds received from the sale. Typically, this involves paying off the mortgage and other secured debts first. Any remaining funds are then distributed among unsecured creditors, or, depending on your bankruptcy plan, used to cover necessary expenses or help fulfill your repayment plan.

An important part of the motion is identifying all creditors who have liens on the property. These are the individuals or entities that hold a legal claim or right against your property until the debt owed to them is satisfied. Listing these creditors in your motion ensures transparency and allows the court to notify them of the proposed sale.

Once the motion is filed, it serves as a notice to all involved parties, including the bankruptcy trustee and creditors. They are given an opportunity to review the motion and raise any objections they might have. This part of the process is critical because it ensures that all stakeholders have a fair chance to voice their concerns and protect their interests.

The court then reviews the motion, along with any objections that have been filed. This judicial review is thorough, as the court aims to ensure that the sale is in the best interest of both the debtor and the creditors. The court’s final decision will dictate how the sale proceeds are to be distributed, ensuring an equitable resolution that aligns with the legal requirements of the bankruptcy process.

In summary, obtaining court permission to sell your house during bankruptcy in Pensacola is a multi-step process that requires careful preparation and adherence to legal protocols. By ensuring that your motion is detailed and accurate, you can help facilitate a smoother approval process and a more efficient sale.


When selling your Northwest Florida house during bankruptcy, incorporating a contingency clause in the sale contract is an indispensable step to ensure that the transaction proceeds smoothly within the legal framework. A contingency clause is a provision that makes the completion of the sale dependent on obtaining permission from the bankruptcy court. This means that the sale cannot be finalized until the court grants approval, safeguarding all parties involved from potential legal complications.

The importance of this clause cannot be overstated, particularly because bankruptcy cases are subject to judicial oversight to ensure that the debtor’s actions are fair and in the best interest of the creditors. By including this clause, you effectively communicate to potential buyers that the sale is subject to court approval, which can help manage expectations and prevent misunderstandings or delays later in the process.

In a Chapter 7 bankruptcy, the inclusion of a contingency clause is crucial if your home has significant equity that exceeds your bankruptcy exemption. Equity refers to the difference between the market value of your home and the outstanding balance on your mortgage. The bankruptcy exemption is the portion of your equity that you are allowed to keep under state or federal law.

If your home’s equity exceeds the exemption, the bankruptcy trustee may decide to sell the property. The trustee’s primary responsibility is to liquidate assets to repay your creditors. Therefore, if the equity in your home is not fully protected by the exemption, the trustee will sell the property, satisfy the mortgage with the sale proceeds, provide you with the exempted amount, and distribute the remaining funds among your unsecured creditors.

Including a contingency clause ensures that all parties understand that the sale is not a certainty until the court provides its approval. This clause acts as a protective measure, preventing the sale from moving forward prematurely and potentially resulting in legal disputes or financial losses for both the buyer and the seller.

Additionally, when negotiating with potential buyers, the contingency clause offers you a safeguard. It allows you to communicate transparently about the potential delays or complications that might arise from the court approval process. Buyers who are aware of and agree to this contingency are more likely to be patient and understanding, reducing the risk of the deal falling through due to unforeseen legal hurdles.

In summary, incorporating a contingency clause in the sale contract when selling your house during bankruptcy in Pensacola is a critical step. It ensures that the sale is conditional upon obtaining court permission, protecting all parties involved and aligning with the legal requirements of the bankruptcy process. This clause helps manage expectations, safeguards against premature transactions, and provides a clear path for the sale to proceed in compliance with bankruptcy laws.


The homestead exemption varies by state and can significantly impact how much of the sale proceeds you are entitled to keep. If your home’s equity is within the exemption limit, you may retain that amount, which can provide a financial cushion as you navigate your way out of bankruptcy. However, any equity exceeding the exemption is considered part of the bankruptcy estate and is subject to distribution among your creditors.

After the mortgage is paid off, the trustee will first satisfy any secured debts associated with the property. These are debts that have specific assets pledged as collateral, such as your home. The mortgage is the primary example of a secured debt that must be paid from the sale proceeds. Once these secured debts are cleared, the remaining funds are allocated based on the bankruptcy plan and the type of bankruptcy filed.

In a Chapter 7 bankruptcy, if the equity in your home surpasses the homestead exemption, the trustee will liquidate the property. The sale proceeds will then be used to pay off the mortgage and any other secured debts. After these obligations are met, you will receive the amount covered by the homestead exemption. Any remaining funds will be distributed among your unsecured creditors, such as credit card companies, medical bills, and personal loans.

In a Chapter 13 bankruptcy, the process is slightly different. Chapter 13 involves a repayment plan where you repay your debts over three to five years. If you decide to sell your home during this period, the sale proceeds must be applied towards your repayment plan. The homestead exemption still plays a crucial role, as it determines how much equity you can retain. Any excess equity will be used to pay down your unsecured debts, helping you fulfill the terms of your repayment plan more quickly.

The proceeds from the sale can also cover the administrative costs associated with the bankruptcy proceedings. This includes trustee fees, court costs, and any legal fees that may arise during the process. Ensuring these costs are covered is essential for the smooth progression and eventual discharge of your bankruptcy case.

It is important to understand that every dollar of the sale proceeds is carefully accounted for and allocated according to the legal priorities established by bankruptcy law. This structured distribution ensures that secured creditors are paid first, followed by administrative expenses, and then unsecured creditors. By following this hierarchy, the bankruptcy court ensures a fair and equitable resolution for all parties involved.

For homeowners in Pensacola facing bankruptcy, knowing how the proceeds will be managed can provide clarity and assist in making informed decisions. Whether the goal is to pay off debts, cover necessary living expenses, or set aside a safety net for the future, understanding the impact of the homestead exemption and the structured allocation of sale proceeds is critical.

In summary, the proceeds from selling your home during bankruptcy in Pensacola are primarily influenced by your homestead exemption and are carefully allocated to settle outstanding debts and cover bankruptcy proceedings. By understanding this process, you can better navigate your financial recovery and plan for life after bankruptcy.

Planned Payments

When selling your house during bankruptcy in Pensacola under Chapter 13, understanding how the sale impacts your planned payments is vital. Chapter 13 bankruptcy involves a structured repayment plan, which allows you to pay off your debts over a period of three to five years. This plan is designed to help you manage your debts in a manageable way while retaining your assets, including your home. However, if you decide to sell your house during this period, adjustments to your scheduled payments are necessary.

The first step is to determine the sale value of your house. The sale price plays a crucial role in how the proceeds will be used to settle your bankruptcy plan. Once you have a clear idea of the expected sale value, you need to inform the bankruptcy court and your trustee about your intention to sell the property. This is done through a motion that requests permission to proceed with the sale, as discussed in the Court Permission section.

Upon approval of the sale, the proceeds from the transaction are allocated directly to your bankruptcy estate. The primary objective is to use these funds to fulfill the terms of your repayment plan. The exact distribution of the proceeds depends on several factors, including the amount of equity in your home and the remaining balance of your repayment plan.

If the sale value is significant enough, you may have the opportunity to settle your Chapter 13 plan ahead of schedule. This means that the sale proceeds can be used to pay off the remaining balance of your repayment plan in a lump sum. Early settlement of your plan can be advantageous, as it allows you to exit bankruptcy sooner and regain financial stability more quickly. Additionally, it can provide a sense of relief and closure, knowing that your debts have been fully addressed.

However, if the sale value is not sufficient to cover the entire balance of your repayment plan, the proceeds will still be applied towards your scheduled payments. In this case, the funds will be distributed according to the priorities established in your bankruptcy plan. Typically, this means paying off secured debts first, followed by administrative costs, and then unsecured debts.

It is important to note that any equity in your home that exceeds the homestead exemption must be used to pay your creditors. This ensures that the proceeds are used to satisfy as much of your debt as possible, in compliance with bankruptcy laws. The trustee will oversee this process to ensure that the funds are distributed fairly and according to the legal requirements.

Adjustments to your scheduled payments may also involve recalculating the amount you need to pay each month. If the sale proceeds cover a significant portion of your debt, your monthly payment obligations may be reduced. This can make it easier for you to manage your finances during the remainder of your bankruptcy plan.

In summary, selling your house during Chapter 13 bankruptcy in Pensacola requires careful planning and coordination with the bankruptcy court and trustee. The sale proceeds are directly allocated to your bankruptcy estate and are used to fulfill the terms of your repayment plan. Depending on the sale value, you may have the opportunity to settle your plan ahead of time, or you may need to continue making scheduled payments with adjusted amounts. Understanding this process can help you make informed decisions and navigate the complexities of bankruptcy more effectively.

Itemized Payoff Statement

When selling your house during bankruptcy, one of the essential steps to ensure a smooth transaction is requesting an itemized payoff statement. This document is crucial because it provides a detailed breakdown of all the amounts you owe on your mortgage and any other liens against your property. Understanding and verifying this information can help you avoid any unexpected fees or financial surprises at closing.

An itemized payoff statement is typically requested from your mortgage lender or servicer. This statement will outline the exact amount needed to pay off your mortgage in full, including the principal balance, accrued interest, and any other fees or charges that may apply. It will also detail any prepayment penalties, late fees, or additional costs associated with your mortgage.

Here’s why obtaining an itemized payoff statement is so important:

  1. Accurate Financial Planning: By having a clear and detailed understanding of your payoff amount, you can better plan for the financial aspects of selling your home. This information allows you to calculate how much of the sale proceeds will be needed to satisfy your mortgage and how much will be left to address other debts or expenses.
  2. Avoiding Unexpected Fees: The itemized payoff statement helps you identify any hidden or unexpected fees that could arise during the closing process. By reviewing this statement carefully, you can ensure that all charges are accurate and justified, preventing any last-minute surprises that could complicate the sale.
  3. Ensuring Compliance with Bankruptcy Requirements: During bankruptcy, every financial transaction is scrutinized to ensure compliance with court orders and bankruptcy laws. An itemized payoff statement provides the necessary documentation to show the bankruptcy court and trustee that your mortgage has been fully satisfied. This transparency is essential for maintaining the integrity of your bankruptcy proceedings.
  4. Facilitating Smooth Closing: Having an accurate payoff statement is vital for the closing process. It ensures that all parties involved, including the buyer, seller, real estate agents, and closing attorney, have a clear understanding of the financial obligations that need to be met. This clarity helps prevent delays or disputes at closing, making the transaction smoother and more efficient.
  5. Negotiating with Creditors: If there are multiple liens or creditors involved, the itemized payoff statement helps you negotiate effectively. Knowing the exact amounts owed allows you to communicate with creditors clearly and arrange for the proper distribution of sale proceeds. This step is crucial for ensuring that all liens are released, and the buyer receives a clear title to the property.
  6. Protecting Your Interests: During a bankruptcy sale, you want to ensure that you are not overpaying or being charged unfairly by your lender. The itemized payoff statement serves as a tool to protect your financial interests by providing a transparent view of all the costs involved in paying off your mortgage.

When you request an itemized payoff statement, make sure to ask for the following details:

  • Principal balance remaining
  • Accrued interest up to the payoff date
  • Any late fees or penalties
  • Prepayment penalties (if applicable)
  • Escrow shortages or surpluses
  • Legal fees or costs associated with foreclosure (if applicable)
  • Miscellaneous fees or charges

By thoroughly reviewing this statement and working closely with your real estate professional and attorney, you can ensure that you have a clear understanding of your financial obligations and avoid any unexpected issues during the sale process.

In summary, requesting an itemized payoff statement is a critical step when selling your house during bankruptcy in Florida. It provides a detailed breakdown of your financial obligations, helps avoid unexpected fees, ensures compliance with bankruptcy requirements, facilitates a smooth closing, aids in negotiating with creditors, and protects your interests. Taking this step seriously can significantly contribute to a successful and stress-free home sale.

The Easiest Way to Sell Your House During Bankruptcy

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If you’re looking to sell your house during bankruptcy in Pensacola, the most efficient way is to sell directly to the trusted cash buyers at Take Flight Home Buyers. Our approach at is centered on transparency at every stage of the process, empowering you to choose the sales method that aligns best with your circumstances. We will outline the costs and potential profits involved in a traditional listing with an agent versus our offer. As local members of the Pensacola community, we prioritize your satisfaction and aim for a lasting positive relationship long after the transaction is complete.

Bankruptcy is stressful, but selling your house doesn’t have to be. Rely on the seasoned professionals at Take Flight Home Buyers who specialize in assisting sellers navigating bankruptcy. We provide a guaranteed closing date, waive commissions and closing costs, and ensure a transparent process with no hidden fees. By opting for a direct sale to the cash investors at Take Flight Home Buyers, you can skip the efforts and expenses of preparing your property for the competitive Pensacola real estate market. We do not impose commissions or additional charges, allowing you to sell your house hassle-free and without the need for endless showings. For a stress-free sale of your home during bankruptcy, consider a direct cash purchase from Take Flight Home Buyers. Contact us today to get started!

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