Can You Buy a Home While You are in Chapter 13 Bankruptcy?


Yes, you can buy a home while you are in Chapter 13 bankruptcy.  Here is how that can happen. First, a debtor must actually speak to a prospective lender and get qualified for the desired home loan.  The lender must qualify or approve the bankruptcy debtor.

Again, it is possible to buy a home while you are in Chapter 13 Bankruptcy.  However, most loans require that you have been in the 13 case for at least one year.  You must have been able to consecutively complete your bankruptcy plan payments on time.  FHA loans fall into this category.  FHA home lending guidelines concerning home loans in Chapter 13 state the following:

A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA mortgage.  Provided the lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive permission from the court to enter into the mortgage transaction.



Next, as noted in the guidelines above, the debtor must obtain permission from the bankruptcy court to incur the debt to buy the home.  Normally, approval to incur debt is sought by filing a motion with the court that supports the request.  A hearing on the motion might not be scheduled for up to 45 days.  Therefore, a debtor should not wait until the last minute to obtain approval.

In order to obtain approval, the motion requesting approval has to explain/provide information on the following:

  • The terms of the proposed home purchase including:
    • purchase price
    • amount of the down payment
    • source of the down payment
    • monthly PITI house payment
  • Proof of your current income (provided by last three months pay advices/stubs, etc)
  • Your resulting budget if the home loan is approved
  • The impact on the current creditors in your Chapter 13 case if the loan is approved
    • Will they receive less/more/same money?

As a general rule, if there is no harm to the creditors, the court will approve the request to incur debt to buy a home.   This scenario normally occurs when the house payment is close to the current rent payment, i,e., housing costs are about the same and there is not harm to creditors.   If, on the other hand, a debtor wants to incur debt where the house payment would be $2,500 and the current rent is $1,250, the debtor can expect an uphill battle for the court’s approval unless there are some other helpful circumstances.


A debtor should let their attorney know immediately that they have qualified for a home loan. Your next step will be to seek approval to buy a home while you are in Chapter 13 bankruptcy.   A debtor can expect that once they have ALL the necessary information to their attorney to analyze, a motion can be normally filed within a week or two.   The hearing on the motion might take as much as 45 plus days.  Therefore, again, do not delay.

[To see a helpful lending matrix, click here.]


By | August 23rd, 2018|attorney, bankruptcy, bankruptcy attorney, Credit, Debt, law, legal|0 Comments

The Chapter 13 Payment Plan

Living within a budget can be a challenge even for the most financially savvy consumer. For those who file a Chapter 13 Bankruptcy, living within a budget takes on a whole new meaning.

The payment plan must be cost-effective to the debtor so that they can keep up with the schedule of payment with the bankruptcy being dismissed. The trustee of bankruptcy would not desire to set a debtor up for failure, and he/she will be working with a bankruptcy lawyer to come up with something fair. After the payment plan has been agreed upon with the debtor, creditors, and the bankruptcy trustee, the bankruptcy court will officially approve it.

After the filing of bankruptcy under Chapter 13, the bankruptcy trustee will be the one to pay your debts, and your first payment will be due will be thirty days after filing the case. In many districts, the trustee will send out a letter to the debtor to disclose all of the payment information, including when and where to send the payment.

When filing, you will have to provide a proposed repayment plan, the most recent year’s tax return, a certificate of credit counselling, a detailed list of expenses, and proof of your income. There are priority payments made to mortgage creditors, and other secured creditors like child support debt and back taxes. As soon as the plan is approved by the bankruptcy court, the trustee will start to pay out the funds that you send in accordance with the plan provision.

If issues arise that cause a decrease in your budget and you are unable to pay, you should contact your attorney and your trustee immediately. If the financial setback is temporary, the trustee can arrange to have the amount of your payment reduced or to get the repayment period extended. If your inability to pay seems to be a more permanent status, your bankruptcy may be converted to a Chapter 7.

Chapter 13 Bankruptcy provides an opportunity for individuals to retain their property and make a fresh start. When making a payment plan, it is important to arrange reasonable Chapter 13 payments in order for the debtor to make payments on time. This type of bankruptcy can be a powerful tool to use for reorganizing your debt and maintaining ownership of your property.

To find out more about how a Chapter 13 payment plan is devised, click here.

By | August 24th, 2016|bankruptcy, budget, Credit, Debt, payment plan|0 Comments

Rebuilding Credit After a Chapter 13 Bankruptcy

Many people prefer to avoid thinking about their credit score after being discharged from a Chapter 13 Bankruptcy. They assume that the bankruptcy will have done irreparable damage, and that it is useless to put effort into repairing their score.

It is true that a bankruptcy can stay on your credit report for ten years, and it is true that a bankruptcy damages a person’s credit score. However, not filing for bankruptcy with major amounts of debt can do the same amount of, if not more, damage to your credit score. So once your bankruptcy has been filed, how do you fix your credit score?

Credit repair is a long process that requires patience and determination. A Chapter 13 Bankruptcy can stay on a credit report for seven to ten years, but it can seem like a lifetime of bad credit– even if you pay off the debt early in your payment plan.

One of the major keys in credit repair is to check your credit report regularly. While there are free credit monitoring services like Credit Karma available, consumers are entitled to a free and complete credit report every year from each of the credit reporting agencies. These can be obtained through (the only authorized website for free credit reports), or by calling 1-877-322-8228.

Once you have your credit report, make a list of all the debts that you have, and what the status is on each one. Make sure that details like addresses and name spellings are accurate, also. This is why the regular credit reports are needed, as you will need to make sure that payments are being reported in the correct amounts. Even a small mistake can lead to huge issues later on when you are trying to rebuild your credit.

The next step after bankruptcy is to start to reestablish credit as soon as you possibly can. Many people believe that they need to wait the 7 or 10 years for the bankruptcy to be removed from their credit report before they start fixing their credit. However, they can start credit repair right after the bankruptcy is finished being filed.

One of the major problems you may encounter is if none of your accounts are over 10 years old, as these accounts have already been removed from the scoring system. This can mean a bankruptcy would be reported, so you have the same credit score as an 18-year-old with no or very little credit history. Applying for credit very soon after the discharge of the bankruptcy will be crucial to start the credit repair process. Some common ways that people rebuild their credit is by using secured credit cards, store credit cards, and car loans. These options are favored because they have lower requirements to qualify for the credit.

Credit cards may seem like a great idea, and after you file for bankruptcy, your mail box may become full of them. While you would think that you are too much of a risk to have a new credit card, banks know that you are not going to be able to file again for at least 3 years. The rates of these credit cards are full of fees and high-interest rates. Make sure to read all the fine print before signing for the card.

Bankruptcy can seem like the end of the world, as it does so much damage to a credit score. However, with time and effort, rebuilding credit is possible. Remember that after 7 or 10 years the bankruptcy will fall off your credit report, and the work that you did after the bankruptcy will remain on it.

By | August 22nd, 2016|bankruptcy, Credit, Debt, Uncategorized|0 Comments