We are currently in the 3rd year of a 5 yr Chapter 13 in WA state. We have made all our payments timely and followed the plan to date. We are wanting to sell our house and move to another state for family reasons. The value of our home has dropped dramatically since filing, but could still net in about $15K in proceeds that we wanted to use for moving and to establish a new residence. Would we be able to keep these proceeds, or would they have to go towards the remaining $25K debt that will be our balance in the bankruptcy? We are willing to set up new payment plan for the balance for the remaining 22 months we have on our current plan. Thanks for your help!
Chapter 7 Bankruptcy Attorney
Washington State provides for a substantial $125,000 exemption in a debtor’s home. If you opted for the federal exemption when you filed, the federal exemption in Washington is $20,200. In either case the $15,000 which you expect in proceeds is exempt and should be able to be kept by you and used by you after the sale of your home as you desire. However there are other potential consequences to the sale and move that you need to consider.
The sale of your home and the payment of mortgages and other liens against the home could result in consequences to your plan and the payment to creditors, especially if your plan provided for the cure of a default in home mortgage payments, or the payment of liens on your home such as tax liens. The sale and move will also inevitably change your budget in some fashion, increasing or decreasing income and expenses. There are provisions in the Chapter 13 bankruptcy laws which allow modifications to a Chapter 13 plan is circumstances change during the term of the plan. The modifications can be sought either by the debtor (usually decreasing the plan payments) or by the Chapter 13 Trustee (usually seeking to increase payments).
Finally you need to keep the trustee and the court advised of the change of address.
You should contact your Chapter 13 attorney and discuss with him the consequences of the sale of your home and your move.
Patrick M. Hunter
Disclaimer: Please note that this answer does not constitute legal advice, and should not be relied on, since each state has different laws, each situation is fact specific, and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. This answer does not create an attorney-client relationship.
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