Selling a House or Land During Bankruptcy in Texas

Short answer: You can often sell real estate during a bankruptcy, but not the way you would outside one. When you file, your property becomes part of the bankruptcy estate and the automatic stay stops most collection. In Chapter 7, the trustee's main job in an asset case is to sell nonexempt property to repay creditors, while property that is exempt under federal or state law stays yours. In Chapter 13, you keep your property while you make plan payments for three to five years, and you may not take on new debt without consulting the trustee. Under 11 U.S.C. Section 363(b), the trustee may sell estate property outside the ordinary course of business only after notice and a hearing. In practice, a sale during a case runs through your bankruptcy attorney, the trustee and the court.

If you are in a bankruptcy, or close to filing one, and you own a house or land in Texas, selling it can look like the simplest way out. It can work, but a bankruptcy changes who gets a say in the sale and where the money goes. This guide explains the basics in plain English so you know what to ask your bankruptcy attorney. It is not a substitute for that conversation.

This article is general information. It is not legal advice. If you are in a bankruptcy case or considering one, talk to a bankruptcy attorney before you sign anything to sell property.

Your property becomes part of the case

When a bankruptcy petition is filed, the debtor's property becomes part of the bankruptcy estate, and the case decides what happens to it. Two things follow right away:

• The automatic stay. The U.S. Courts explain that filing a petition automatically stops most collection actions against the debtor or the debtor's property, without a separate court order. Creditors generally may not start or continue lawsuits, garnish wages, or call demanding payment while it is in effect.
• A trustee. A trustee is appointed to administer the case. What the trustee does with your real estate depends on the chapter you file under.

Chapter 7: the trustee sells nonexempt property

In Chapter 7, the U.S. Courts say the primary role of the trustee in an asset case is to liquidate the debtor's nonexempt assets, meaning sell them and use the proceeds to repay creditors. The Bankruptcy Code also allows the debtor to keep certain property that is exempt, under federal law or the debtor's state law depending on the case.

For a Texas homeowner or landowner, the key question is whether your house or land is exempt. If it is, you may keep it. If it is not, the trustee may sell it, and in that case the trustee, not you, runs the sale. Exemptions turn on details like the use of the property, its size and where it is, so your attorney is the one to answer this.

Chapter 13: you keep the property while you pay the plan

Chapter 13 works differently. The U.S. Courts describe it as letting the debtor keep property and pay debts over time, usually three to five years, under a repayment plan. Once the plan is confirmed, the debtor keeps the property as long as the payments are made. The same page notes that the debtor may not incur new debt without consulting the trustee.

Owners in Chapter 13 sometimes decide to sell a house or land partway through, for example to pay off the plan early or because the payments are no longer realistic. That is often possible, but it is a request made inside the case, not a private sale.

Why the court and the trustee are involved

The federal statute that governs selling estate property is 11 U.S.C. Section 363. Its subsection (b)(1) says the trustee, after notice and a hearing, may use, sell or lease property of the estate other than in the ordinary course of business. Selling a house or a tract of land is not ordinary course for most people, which is why a sale during a case generally goes through notice to creditors and the court's approval.

For you, that means three practical things:

1. Tell your attorney first. Before you list the property or sign a contract, your attorney needs to know.
2. Expect more time. Notice periods and a court order add weeks to a normal closing. A buyer who understands that is worth more than a slightly higher offer from one who does not.
3. The money is handled by order. Liens such as a mortgage or back taxes are usually paid at closing, and what happens to the rest depends on your chapter, your exemptions and your plan.

Selling before you file

Some owners ask whether to sell first and file later. Selling before or after filing can have very different results, for your exemptions and for how the sale is treated in the case. Talk to a bankruptcy attorney before you sign a contract if a bankruptcy is possible. If the property is also behind on taxes, our guide on tax sales vs. foreclosures in Texas explains the deadlines that may be running at the same time.

How a buyer fits in

A buyer who has worked through a bankruptcy sale knows to put the contract subject to court approval, to wait for the order, and to close with a title company that handles the payoffs. If you want to know what your house or land could sell for, so your attorney has a real number to work with, you can ask us for a cash offer. See also our bankruptcy help page, and selling a house as it is covers the rest of the process.

Common questions

Can I sell my house while in Chapter 13 bankruptcy in Texas?

Often, yes, but not on your own. Your property is part of the bankruptcy estate, and a sale generally needs the trustee's involvement and the court's approval. Your bankruptcy attorney files the request and explains how the proceeds are handled under your plan.

What happens to my land in Chapter 7 bankruptcy?

The U.S. Courts explain that in an asset case the Chapter 7 trustee's main role is to liquidate the debtor's nonexempt assets to repay creditors. Property that is exempt under federal or state law can be kept. Whether your land is exempt depends on the facts and the exemptions that apply, which is a question for your attorney.

Does the automatic stay stop a foreclosure or tax sale?

Filing a bankruptcy petition automatically stays most collection actions against the debtor and the debtor's property, according to the U.S. Courts. How long it lasts and what it covers in your case depends on the details, so ask your bankruptcy attorney.

Who gets the money if I sell property during bankruptcy?

It depends on the chapter, the liens on the property, your exemptions and your plan. Liens such as a mortgage or taxes are usually paid at closing, and the rest is handled under the court's order. Your attorney and the trustee decide this, not the buyer.

Should I sell before filing bankruptcy instead?

Selling before or after filing can have very different results. Talk to a bankruptcy attorney before you sign any contract to sell real estate if a bankruptcy is possible.

Sources

• U.S. Courts: Chapter 13 Bankruptcy Basics
• U.S. Courts: Chapter 7 Bankruptcy Basics
• 11 U.S. Code Section 363 (use, sale, or lease of property)

Each source was opened and read on October 19, 2026. Rules and rates change: check the source for the current version.

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