It is routine for Debtors to file a Chapter 13 bankruptcy case and use the sale of their home to satisfy their mortgage after court approval of a sale. That sale requires a motion to be served on the secured parties and the Chapter 13 trustee. The issue of allocation of the sale proceeds arises when non-exempt equity in the home is part of the Plan funding and the confirmed Chapter 13 Plan pays less than 100% to unsecured creditors
The legal issue arises when the debtors seek to retain as much of the non-exempt equity as possible after fully paying their Chapter 13 plan. Most Chapter 13 trustees assert the standard position that nearly all non-exempt equity after payment of the Debtor’s allowed amount for a properly asserted real estate exemption should be dedicated to the payment of creditor claims.