How Agents Can Help Bankrupt Homeowners Rebuild Faster by Selling Strategically

Important Note: PropStream does not offer legal advice. Before offering any of the solutions mentioned below, we recommend doing your own research and/or consulting with a legal professional who specializes in bankruptcy law.

Bankruptcy can be a scary position for homeowners to be in. But as an agent, you can educate them on their options and help them get back on their feet. With empathy and know-how, you can show them how to sell strategically, protect their equity, and rebuild their financial future. 

Understanding Bankruptcy in Real Estate

Filing for bankruptcy doesn’t automatically mean losing a home, but it does signal financial distress and potential motivation to sell. For many homeowners, their primary residence is their largest asset, making a strategic sale one of the fastest ways to resolve debt and move forward.

However, the decision to keep or sell often depends on the bankruptcy type. In Chapter 7 bankruptcy, homeowners with significant “non-exempt” equity may be required to sell so that the proceeds can be distributed among creditors.

Meanwhile, Chapter 13 bankruptcy offers more flexibility. Homeowners can keep their home by including mortgage arrears in a 3-5-year repayment plan. However, neither filing type prevents foreclosure if the homeowner remains delinquent on mortgage payments after bankruptcy.

As a result, even if the bankruptcy doesn’t require a home sale, many distressed homeowners may want to sell to avoid foreclosure and preserve their equity.

The Agent’s Role in Helping Homeowners

As a real estate agent, your job is to help your clients do what’s in their best interest. For someone going through bankruptcy, this could be selling their home. 

However, you must approach these conversations with empathy, discretion, and professionalism. After all, a home isn’t just a financial asset. For many, it’s where they’ve built their lives, and losing it could take an emotional toll.

Carefully educate your clients on their options and then guide them through their chosen path, ensuring it complies with all the requirements set by the bankruptcy court and trustee.

Timing Matters: When to Approach Bankrupt Homeowners

The best time to reach out to bankruptcy leads is early, ideally before they file or shortly after filing. At this point, homeowners are still exploring their options and are more receptive to learning how a strategic sale could help them avoid foreclosure.

Once bankruptcy is underway, timing becomes more urgent. Pay attention to key dates like the 341 meeting (a meeting with the trustee and creditors) and any foreclosure sale dates on the property. These deadlines often spur homeowners to act quickly.

That said, even homeowners deep into Chapter 13 repayment plans may still benefit from selling if they’re struggling to keep up with payments. The key is positioning yourself as a resource throughout their journey and not just at the moment of crisis.

Strategic Selling Options During Bankruptcy

Here are the top strategic selling options to present to homeowners facing bankruptcy:

Pre-Bankruptcy Sale

If a homeowner has yet to actually file for bankruptcy, a home sale could help them avoid it altogether. Not to mention, they’d retain more control over the transaction’s timing and price. However, they’ll still be short on time, so connecting them with cash buyers could be a big help.

Trustee-Approved Sale

If bankruptcy proceedings are already underway, the trustee may approve a sale as part of a Chapter 7 liquidation or Chapter 13 repayment plan. Either will likely result in a better deal than waiting till a foreclosure auction, where the highest bid could be well below market value.

Short Sale

If the homeowner owes more on their home than it’s worth, have them consider a short sale. This involves selling the home for less than the outstanding mortgage debt with the lender’s and bankruptcy court’s approval. Though complex, it’s often the best way to resolve negative equity.

Benefits for Both Parties

Ideally, helping distressed homeowners sell their homes is a win-win.

The homeowner regains control over their finances, limits damage to their credit, and moves forward toward financial recovery, while you earn a commission on the home sale. 

This is why it can pay to focus on bankruptcy leads. They’re often overlooked by other agents, but they’re highly motivated to sell and need professional guidance.

Prioritizing Compliance and Compassion

That said, bankruptcy leads tend to require more care than your average client. Not only must you be sensitive to their challenging situation in your communications with them, but you must ensure they understand and comply with bankruptcy regulations. 

Work closely with a bankruptcy attorney to ensure you’re navigating the process correctly and always protecting your client’s interests.

How to Find Bankruptcy Leads With PropStream

Now that you understand the value in working with bankruptcy leads, you may wonder where to find them. While you could search through public records, there’s an easier way.

PropStream aggregates data from public records nationwide to help you build targeted lead lists. If a homeowner has an active Chapter 7 or 13 bankruptcy filing, they’ll automatically appear in property searches with the “bankruptcy” filter applied.

Plus, PropStream has a pre-built “Bankruptcy” lead list designed to help you identify properties associated with bankruptcy filings in your market.

Once you’ve identified bankruptcy leads in your market, you can skip trace their contact information and reach out to them through an email or postcard marketing campaign—all without leaving PropStream.
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