How To Buy a House With Chapter 13 Bankruptcy




how to buy a house with chapter 13 bankruptcy

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Have you recently lost a job or fallen behind in your bills? Are you drowning in debt and currently can’t make ends meet every month? Filing for chapter 13 bankruptcy may ultimately allow you to buy a home with a low money down payment and a monthly payment that fit your budget.

Here’s how to buy a house with chapter 13 bankruptcy:

  1. Understand what chapter 13 means.
  2. Hire a chapter 13 attorney.
  3. Check if you qualify for a chapter 13 bankruptcy mortgage.
  4. Determine if you can afford your monthly payments.
  5. Research home prices in your area.
  6. Work with an experienced real estate agent.

This article will discuss how to buy a house with chapter 13 bankruptcy in more detail. Below are the steps you need to take.

1. Understand What Chapter 13 Means

Chapter 13 bankruptcy is a type of debt repayment plan that allows individuals with a regular income to create a plan to repay some or all of their debts over three to five years. It doesn’t involve surrendering any property, as is necessary for a chapter 7 bankruptcy.

Instead, it requires the filer to develop a realistic payment plan based on what they can afford and includes some relief from late fees and interest charges.

The idea behind chapter 13 bankruptcy often appeals most to those who need to control their finances within three to five years. Or, it’s for people who want an affordable way out of debt but might not qualify for other types of financial relief like chapter 7 or 11.

Here’s a YouTube video that describes chapter 13 bankruptcy:

2. Hire a Chapter 13 Attorney

If considering filing for Chapter 13 bankruptcy, your first step should be to consult an attorney.

The bankruptcy lawyer’s job is to protect the rights of their client and help them understand their options under applicable laws. An experienced attorney can guide you through the entire process of how to buy a house with chapter 13 bankruptcy.

For example, if you have any non-exempt property that doesn’t fit into one of the exceptions outlined in bankruptcy law, such as a second home, the debt repayment plan proposed by your lawyer must specifically exclude these properties from being used to pay creditors back. Your bankruptcy lawyer will know how to handle the differences between leasing a house vs. renting if you do not own a home.

Your attorney will ensure all aspects of your case are handled appropriately—from negotiating with creditors on a repayment plan to filing the required bankruptcy paperwork.

What To Look For When Hiring an Attorney

It’s important to hire an experienced bankruptcy attorney specializing in chapter 13 bankruptcy. Look for a lawyer who understands the local court system and has received positive client feedback.

Hiring a Chapter 13 lawyer is expensive, so try to find ways to lower the cost of legal fees.

For example, your attorney might accept monthly payments instead of requiring that you pay everything up front, which usually entails additional fees. You could also ask if they offer free initial consultations. This will allow you to evaluate whether working with this person is right for you before finalizing anything.

Here are some tips for finding good legal representation:

  • Ask friends and family members who have filed for chapter 13 bankruptcy to recommend a lawyer.
  • Look for experienced attorneys with bankruptcy cases and ask about their experience level.
  • Try to find lawyers who have won awards, made industry contributions, or belong to prestigious associations, which are all signs of professional excellence.
  • Check whether your potential attorney is licensed to practice law in your state. If you don’t want to work with an attorney locally, consider hiring someone from out-of-state who has the required license(s).

3. Check if You Qualify for Chapter 13 Bankruptcy Mortgage

Once you have retained a lawyer, it’s time to determine whether or not you’re eligible to buy a house with chapter 13 bankruptcy. To qualify, you must meet specific income requirements set out by Congress depending on household size.

These limits don’t include debt incurred through fraud, which is why hiring an attorney ahead of time always makes sense. You want to do this so that everything about your case is accurate and up-to-date before it goes before the bankruptcy judge.

what is chapter 13 bankruptcy

Those who file for chapter 13 bankruptcy hope to keep their homes in the process if possible. It’s important to know that filing for this type of protection does not mean all your debts will be erased.

For example, if you have a second home that doesn’t fit into an exception as outlined by law (such as a primary residence or a vacation home), that property must be excluded from the repayment plan.

If that is the case, you may have to get a mortgage loan from a foreign bank as an option for your second home.

In addition, the bankruptcy court might require additional fees for this type of property, and those who fail to pay could see their case dismissed entirely.

In many cases, you can work with your lawyer and creditors to negotiate a settlement on payment plans and terms so you can keep your home after filing for Chapter 13 bankruptcy protection.

Minimum Requirements To Qualify for Chapter 13

In general, you must meet the following eligibility requirements to file for chapter 13 bankruptcy:

  • Your annual income after taxes, or your current monthly income if you earn the same amount every month, must fall within prescribed limits set by Congress.
  • You must have written court approval from all of your creditors.

All of your nonexempt assets will be transferred to a bankruptcy estate. Any properties that don’t fit into certain exceptions outlined in law cannot be used to pay back creditors, and possible additional fees will apply.

You’ll also need to meet the following guidelines when filing for this type of protection:

  • You must have filed all tax returns as required by law.
  • If you owe child support or alimony, you must make all your payments on time.
  • You must have paid all bankruptcy fees in full or be able to pay them in installments.
  • You must provide all financial records.

Alternatives To Chapter 13 Bankruptcy Mortgage

There are other cheap housing options for a residence that might be another option if you are looking for a place to live.

If you’re unable to keep your home after filing for Chapter 13 bankruptcy, other housing options are available. HUD (Housing and Urban Development) offers a variety of programs that can help people in difficult financial situations, including those who have filed for bankruptcy.

There are alternatives to securing housing with a chapter 13 bankruptcy, including:

  • Public Housing: This program offers affordable rental units to low-income families. If you are a section 8 landlord, you can also benefit from this program.
  • Housing Subsidies: HUD also offers financial assistance to help with housing costs for eligible low-income families and people living with disabilities.
  • Rental Assistance: If you or your family members need temporary support, or if you want to get back on your feet before securing homeownership
  • Cooperative Housing: This type of living situation can be a good alternative for people who want to live in a community with shared responsibilities. Cooperative Housing is not subsidized, but the monthly fees are lower than market rates.

4. Determine if You Can Afford Your Monthly Payments

Once you’ve filed for chapter 13 bankruptcy, you might be able to keep your property, but you’ll still need to cover the mortgage payment. This option isn’t available for those who have been behind on their payments or those whose homes are worth less than what they owe on the loan.

Many ask can passive income be used to qualify for a mortgage when loan shopping.

In addition, under this type of protection plan, interest rates can quickly skyrocket, so it’s important to know how much money you’ll need every month before filing.

While a qualified attorney can help you determine if this type of financial protection is right for you, the following factors must be addressed:

  • What’s your current monthly income?
  • Why did filing bankruptcy become necessary in the first place?
  • Can you afford to pay monthly interest on your mortgage for the remaining years until the loan is paid in full?
  • What are your assets worth today?
  • How much do you owe to creditors right now?

Can You Get an FHA Mortgage While In Chapter 13 Bankruptcy?

Yes, provided payments for a chapter 13 bankruptcy have been made for a minimum of one year. These payments must be verified along with approval from the Court’s bankruptcy trustee. Your application must also include a bankruptcy explanation, that you financially qualify, have a stable job, and your credit is adequate.

can you get an fh aloan while in chapter 13 bankruptcy

An FHA mortgage while in bankruptcy is not a guarantee and should be discussed with your bankruptcy attorney.

5. Research Home Prices in Your Area

If you meet the minimum requirements for a chapter 13 bankruptcy filing but don’t own your home, there’s no reason to wait. But if you’ve been trying to get a mortgage and have been denied time and again, this type of protection might be right for you.

Determining fair market value is essential when it comes to protecting your property after filing for Chapter 13 bankruptcy because these types of cases allow all nonexempt assets to be transferred into the bankruptcy estate. 

Any properties that don’t fit into specific exceptions outlined in law can’t be protected.

In addition, under this kind of protection plan, all debt repayment must come from current monthly income or written court approval. You can research prices in your area by visiting open houses, speaking with real estate agents, and looking into homes that have recently sold.

Alternatively, you could check the prices online by visiting the relevant websites, which I’ll describe in the next section.

Several websites provide you with essential information regarding under contract vs. pending properties and recently sold homes. However, finding the best sites can be problematic, especially without previous experience.

Nonetheless, you can use any or all of these options to determine fair market value. Let’s take a quick look at them.

This is one of the best sites for buying a property because it lets you check out recent sales prices in your neighborhood. You can find out how much homes are worth, the date they were purchased, and whether or not they’re currently for sale.

In addition, you can use this site to discover the most popular neighborhoods and the top homebuyers in your state.


This is another great option for researching prices because it provides all the necessary details about recently sold homes, including location and size. You’ll also find out how much they were purchased and whether they’re currently for sale.

Besides, this website tells you about other homes for sale in the area, explains their appeal, and lets you calculate the home’s estimated value.

However, you might need to take their information with a grain of salt because they have recently been accused of driving up home prices. They would buy a house, make minor repairs, and then sell it for way more than its assessed value. So this site might not be a valuable resource at this time.


This site provides you with all essential details about recently sold homes that are currently on the market. You can find out what they’re selling for, how much they were purchased for initially, how large they are, and whether or not they need repairs.

You’ll also discover nearby attractions and nearby schools because Trulia has an amazing interactive map to let you see exactly where these places are located.


This is yet another great option if this is your first time buying a house because it tells you exactly how much your home is worth.

Notably, this site lets you search for recent sales prices and those currently on the market. It’s a great place to check out nearby listings and data from different cities around the nation.

Note: You’ll want to keep in mind that appraisals can be expensive and their accuracy varies depending on who performs them, so I recommend using more than one site to determine the actual market value of your property.

6. Work With an Experienced Real Estate Agent

When it comes to selling your home after filing for Chapter 13 bankruptcy, hiring a real estate agent is ideal because they have access to information about what homes are selling for in your area and how much tax revenue must be paid out.

In addition, these agents know housing trends and can help you make educated decisions that could increase your chances of being approved by a creditor or mortgage lender once the process is complete.

Some use a home appraisal checklist, and they can also help sell your home quickly.

That said, finding the right agent for this type of transaction can be difficult. Finding someone familiar with bankruptcy laws is essential because they need to know what properties would be ideal for repaying creditors.

Remember, most lenders won’t finance a home currently in bankruptcy proceedings. So you’ll want to look at homes that are either already paid off or those that are close to being paid off completely, which could include short sales, foreclosures, and pre-foreclosure properties.

What To Look For in a Realtor

There are certain criteria you should look for when hiring a real estate agent to work with your case:

  • They must keep your best interests at heart and prioritize them above all else. They shouldn’t be working against you or your interests.
  • They must be familiar with chapter 13 bankruptcy proceedings.
  • They must be armed with knowledge about what types of properties qualify. Otherwise, you may be wasting your time and theirs.
  • They must be local and knowledgeable about properties in your area.
  • They should have good communication skills and always keep you updated on the progress.
  • Their fees should be fair and reasonable.
  • They need to be honest and open about the process. They shouldn’t attempt to sugar-coat or embellish anything because it could come back to haunt you later on.
  • This person must have a track record of success helping clients get approved for mortgages in bankruptcy.
  • They should have a good working relationship with local lenders, real estate attorneys, and other professionals that you need to work with throughout the process, depending on which state you live in.

In addition, they should be familiar with the latest laws and regulations surrounding bankruptcy petitions, including which parties can access your information through public records.

Caution: You may want to avoid agents that don’t specialize in foreclosures or short sales because these deals involve complicated transactions that require a lot of specialized training. Additionally, experts recommend using someone who has filed bankruptcy before and knows the ins and outs of the process. They can help make it as smooth as possible for you.

What You Should Expect From Your Agent and Lender

Once you and your agent have found a home you want to make an offer on, it’s time to meet with your lender. But remember, before they approve your application, lenders will require proof that the home is debt-free or close to being paid off, including taxes and insurance.

In addition, if the house is in foreclosure proceedings, you’ll need proof from the bank that they’ve been discharged from these proceedings before you can move forward with purchasing this property.

Remember, lenders may require a down payment for a short sale or pre-foreclosure as well as closing costs. You must have enough cash on hand for all of these expenses, or it could hamper your ability to get approval.

And finally, don’t forget to read your credit report. 

If you find errors, dispute them immediately and get them fixed. These mistakes could make it more difficult for you to get approval because the lender may not be willing to work with you. Or, if they do, you could end up paying a higher interest rate.

Here are some sites that provide credit reports:

  • Annual Credit This site is part of the Federal Trade Commission and is recommended by the National Foundation for Credit Counseling. They allow you to request one free credit report from each bureau: Equifax, TransUnion, and Experian, every 12 months.
  • This site requires that you provide some personal information to get your free credit report. You’ll need to enter your Social Security number and then answer several “knowledge-based authentication” (or KBA) questions, which vary depending on the information found in your credit report.
  • Credit SesameThis site provides two free credit scores every month for your review.

For additional information on buying and keeping your property when applying for Chapter 13 bankruptcy, I recommend reading Nolo 12th Edition Chapter 13 Bankruptcy (available on 

The authors describe the steps above in detail, making the process easier to understand. 

Can you get a home equity line of credit (HELOC) after a Chapter 13 bankruptcy?

Yes, you can get a HELOC after a bankruptcy if certain conditions are met. If you’ve been making regular payments on your Chapter 13 bankruptcy plan for at least two years, then a lender may be more likely to approve you for a HELOC. You must also have enough equity in your home to qualify for the loan.

Is a HELOC considered a revolving credit facility?

A HELOC is considered a revolving credit facility because you can borrow against it multiple times. This means that if you have a $10,000 HELOC and you only use $1,000 of it, the lender will still consider the full $10,000 to be outstanding debt. A revolving credit facility vehicle can be a good option if you want to rebuild your credit after a bankruptcy.

What types of mortgages are available after a Chapter 13 bankruptcy?

The most common type of mortgage available after a Chapter 13 bankruptcy is a conventional mortgage. However, government-backed mortgages, such as FHA and USDA loans may be an option for you.

Can you get a conventional mortgage with a Chapter 13 bankruptcy?

Yes, you can get a conventional mortgage with a Chapter 13 bankruptcy (after you’ve made 12 on-time payments and your plan has been completed). However, to get one of these mortgages, lenders may require that the property be debt-free for several years after the bankruptcy is discharged.

Final Thoughts

For anyone who has found themselves behind on mortgage payments or unable to get approved for a loan after filing bankruptcy, a chapter 13 bankruptcy filing could be the answer to their problem. 

As more homeowners fall victim to foreclosure or foreclosure proceedings, chapter 13 filings continue to rise. Experts believe this trend will continue as people look for alternative ways of buying homes with a bankruptcy on their records. 

Notably, it’s possible to purchase a home with chapter 13 bankruptcy if you have “good-faith money,” a well-thought-out plan, and the help of a capable real estate agent. 

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