Chapter 7 Bankruptcy and Your Home

In Chapter 7 (liquidation) bankruptcy, a trustee is appointed to liquidate non-exempt assets to pay creditors. Your home may be an asset the trustee can sell, depending on your equity and Florida's homestead exemption.

Florida's Homestead Exemption

Florida has one of the most generous homestead exemptions in the country — unlimited for homes on half an acre or less in a municipality, or 160 acres outside a municipality. If your home qualifies as homestead, the trustee generally cannot sell it in Chapter 7.

However, the homestead exemption doesn't protect against the mortgage lender — if you're behind on payments, the lender can still foreclose.

Chapter 13 Bankruptcy and Your Home

In Chapter 13 (reorganization) bankruptcy, you keep your assets and repay creditors through a 3–5 year payment plan. You can sell your home during Chapter 13 with court approval. The proceeds are used to pay off the mortgage and may be used to pay creditors or fund your plan.

The Court Approval Process

To sell during bankruptcy, your attorney files a motion with the bankruptcy court. The court notifies creditors, who have an opportunity to object. If no objections are filed (or they're overruled), the court issues an order approving the sale.

This process typically takes 3–6 weeks. Plan your closing date accordingly.

What Happens to the Proceeds

• The mortgage is paid off first
• Other liens are paid in priority order
• In Chapter 7: remaining proceeds go to the trustee for distribution to creditors (unless exempt)
• In Chapter 13: proceeds may be used to fund your repayment plan or distributed to creditors

Bankruptcy law is complex. Always consult a bankruptcy attorney before selling a home during bankruptcy.