You can sell your house the day your Chapter 13 discharge is entered. There is no court-imposed waiting period after discharge, and the sale becomes an ordinary real estate transaction. If you need to sell before your repayment plan is complete, that is also allowed, but the bankruptcy court has to approve the sale first, and the proceeds are distributed according to bankruptcy rules rather than handed to you at closing.
Selling After Your Discharge
Once you finish every payment under your plan and the court enters your discharge order, the case closes and court oversight ends. The automatic stay that restricted actions against you and your property throughout the case terminates upon discharge.1Office of the Law Revision Counsel. 11 U.S. Code 362 – Automatic Stay You can list the house the same day the discharge comes through.
At that point there is no motion to file, no trustee to satisfy, and no distribution plan to submit. You negotiate with buyers, close the deal, and keep the proceeds like any other seller. The one lingering issue is practical rather than legal: the bankruptcy will appear on your credit report for up to seven years from the filing date, which can affect the terms you get if you are also trying to finance a replacement home.
Selling While Your Plan Is Still Active
Selling before discharge is possible, but it is not something you can do quietly. When you file Chapter 13, nearly everything you own becomes part of the bankruptcy estate, and federal law specifically broadens that definition to include property and income acquired during the life of the plan.2Office of the Law Revision Counsel. 11 U.S. Code 1306 – Property of the Estate Your home sits inside that estate, which puts it under the bankruptcy court’s jurisdiction.
Because the home is estate property, federal law requires notice and a hearing before it can be sold outside the ordinary course of business.3Office of the Law Revision Counsel. 11 U.S. Code 363 – Use, Sale, or Lease of Property The court and the Chapter 13 trustee act as gatekeepers, checking that the price is fair and that creditors get what they are owed from any equity. Closing without approval can void the sale or get your case dismissed.
Getting the Court’s Approval
Your bankruptcy attorney files a motion asking permission to sell. The motion sets out the terms of the deal and explains why the sale makes sense. Expect a supplemental attorney fee for this work, either flat or hourly, which the attorney has to apply to the court to receive.
The motion needs to include:
- A signed purchase agreement showing the price and terms
- An itemized estimate of closing costs, including title insurance, escrow, commissions, and recording fees
- Current payoff amounts for the mortgage and any other liens
- A proposed distribution of the sale proceeds down to the dollar
After filing, the court notifies the trustee and all creditors. Under the Federal Rules of Bankruptcy Procedure, objections must be filed at least seven days before the proposed action, and an order authorizing the sale is automatically stayed for 14 days after entry.4Legal Information Institute. Federal Rules of Bankruptcy Procedure Rule 6004 – Use, Sale, or Lease of Property Local courts often set longer notice periods, with 21 to 30 days being common. Plan on 30 to 60 days from motion to approval, longer if anyone objects. Do not lock in a closing date until you have the signed order.
Where the Money Goes
Sale proceeds do not come to you as a lump sum. They pay out in a set priority order.
Secured debts on the property come first. That means the mortgage payoff, any home equity loan, and any tax liens attached to the house. Standard closing costs follow, covering title, escrow, and the real estate commission. After those obligations, the homestead exemption protects a portion of your equity. The federal exemption amount is $31,575 as of April 2025, but most states set their own figure, and the numbers vary widely. Whatever your state protects, or the federal amount if your state lets you choose, is yours.
Any equity above the exempt amount is non-exempt and goes to the Chapter 13 trustee, who applies it to your unsecured creditors: credit card balances, medical bills, and similar debts. If the non-exempt proceeds are large enough to satisfy the remaining plan balance, the sale can actually finish your case early.
One thing that often works in the seller’s favor: courts have generally held that appreciation in the home’s value after the filing date belongs to you rather than the estate. If the house was worth $220,000 when you filed and $350,000 when you sell, the increase typically stays with you when the trustee calculates non-exempt equity.
Your Repayment Plan Will Change
A home sale during Chapter 13 almost always triggers a plan modification. Federal law lets the debtor, the trustee, or any unsecured creditor request changes to a confirmed plan at any time before the payments are done.5Office of the Law Revision Counsel. 11 U.S. Code 1329 – Modification of Plan After Confirmation The modified plan can raise or lower payments, extend or shorten the term, or shift how much creditors receive.
Two practical consequences. If your confirmed plan cured mortgage arrears through plan payments, those payments end once the mortgage is paid off at closing. And eliminating a monthly mortgage payment frees up disposable income, which the trustee may argue should go to unsecured creditors above what the original plan required. Your attorney negotiates the terms of the modified plan, and the court decides.
Capital Gains on the Sale
The standard primary-residence exclusion applies to Chapter 13 home sales. If you owned and lived in the home for at least two of the five years before selling, you can exclude up to $250,000 of gain, or $500,000 on a joint return where both spouses meet the use requirement.6Office of the Law Revision Counsel. 26 U.S. Code 121 – Exclusion of Gain From Sale of Principal Residence
Chapter 13 debtors file their own individual returns during the case, so the exclusion works as it would outside bankruptcy. Any gain above the exclusion is taxable in the year of sale. Build that potential tax liability into your planning, because a tax bill during an active plan can affect your ability to keep making payments.
Buying Again Afterward
If the plan is to buy another home, the waiting periods depend on the loan type and whether the case ended in discharge or dismissal.
- FHA loans are available during an active Chapter 13 after at least 12 months of on-time plan payments, with written permission from the bankruptcy court to take on the new debt.7U.S. Department of Housing and Urban Development. How Does a Bankruptcy Affect a Borrower’s Eligibility for an FHA Mortgage
- VA loans follow a similar path for eligible veterans: 12 months after filing, satisfactory payment history, and court approval.
- Conventional loans backed by Fannie Mae require two years from the discharge date. If the case was dismissed rather than discharged, the wait is four years from dismissal, which can drop to two years for extenuating circumstances. There is no exception to the two-year post-discharge requirement.8Fannie Mae. Significant Derogatory Credit Events, Waiting Periods, and Re-Establishing Credit
If you are selling during an active plan and need to buy right away, FHA and VA are the realistic options. Conventional financing generally has to wait until after discharge. In every scenario, lenders look at income stability, debt ratios, and payment history since filing at least as closely as they look at the bankruptcy itself.