Buying a home is a major part of the American dream for most people. Of course, it can be very difficult making that dream a reality. Securing the mortgage you need can be even tougher if you’re currently subject to repayment plan established in a Chapter 13 bankruptcy. While it’s not impossible to buy a house during this period, doing so successfully requires careful planning, approval from the bankruptcy court and a clear understanding of the potential obstacles.
Chapter 13 bankruptcy gives people the chance to establish reasonable terms for their debts so they can pay them off over a timeframe lasting from three to five years. Unlike Chapter 7 bankruptcy, where assets may be liquidated to pay creditors, Chapter 13 allows you to keep your property while making regular payments to bring down your debt. This structure can provide a path to financial stability, but it also comes with certain restrictions, particularly regarding significant financial transactions such as buying a home.
Before you can purchase a home while on a Chapter 13 repayment plan, you must obtain court approval. As you’re already bound to honor the terms of the schedule established to pay off your debts, any major financial decision—including taking on new debt to buy a home—must be approved by the bankruptcy court. The court will evaluate whether the purchase is feasible and whether it will affect your ability to continue making payments pursuant to your Chapter 13 plan.
In addition to court approval, you’ll also need to secure financing. Many lenders are hesitant to offer mortgages to parties who have filed for bankruptcy, because they perceive a greater risk of default. However, while securing a mortgage may be challenging, some lenders are willing to work with borrowers in Chapter 13 if they have complied with their court-ordered repayment schedule. Be prepared to provide extensive documentation, including proof of income, a copy of your bankruptcy plan, and a history of your plan payments.
Before you make any decisions, it’s wise to discuss your intentions with an experienced Chapter 13 bankruptcy attorney. At Jeff Field & Associates, we can help you understand the process, guide you through the court approval steps and advise on whether buying a home is financially viable given your current situation. Depending on how far along you are in your repayment plan, it may be beneficial to wait until you’ve completed the plan and had any remaining obligations discharged. This would likely make it easier to obtain financing and could result in better mortgage terms.
We serve Georgia clients from offices in Bogart, Douglasville, Gainesville, Lawrenceville, Marietta and Scottdale. To schedule a consultation about your Chapter 13 repayment plan or another bankruptcy matter, please call 404-381-1278 or contact us online.