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Buying a Home While in Chapter 13

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Mark Cappel
UpdatedDec 28, 2009
I am two years into a five-year Chapter 13 plan and want to buy a house. How do I convince the trustee to allow me to do so?

I just completed my 2nd year of repayment for a 5 year Chapter 13 bankruptcy. I am interested in purchasing a home through FHA, but I'm told that I need to get authorization from the BK trustee or judge. My BK attorney tells me that I need to start the homebuying process, locate a home and go under contract on a home before he can start the process of getting the trustee to authorize me to get a home loan. In addition, the attorney charges $750 for the service. It seems a little backward to me to go under contract on a home before getting the trustee's approval to get a loan, not to mention the fact that the loan officer has already told me that I can't start the loan approval process without the trustee's authorization. So, it's a catch-22. I don't know what to do, plus I can't afford to pay $750 to my attorney. Please give me some advice. Can I file on my own, and if so, what form do I use? And do I really have to go under contract before I get authorization to get a home loan from the trustee?

I understand your frustration. I also admit to being baffled by your message. I wonder how you can afford a house payment if you are in the midst of a Chapter 13 plan, but I will assume you have a steady income and can afford the plan and a mortgage. However, if that is the case then you should be able to afford paying your attorney $750 to help you accomplish your purchase. Let me set my confusion aside and answer your questions.

The bankruptcy trustee does not want to issue you a virtual blank check to buy a house without knowing the exact terms of the purchase. Therefore, you need to convince the mortgage broker or loan officer to give you a conditional or contingent letter of credit for a mortgage/deed of trust in the amount of the loan you seek. If the present loan officer/mortgage broker is unwilling or unable to do so, then find another. The mortgage business is always very competitive and if you cannot find a broker willing to work with you then find another.

Regarding the forms required to petition the trustee to allow you to purchase the home, yes, you can do this yourself. Do not. Most people who attempt to file their own bankruptcy fail. The process is not rocket science, but it is not obvious or easy, either. Work with your attorney. By doing so your petition will be correct, and if it is not you have recourse if the attorney committed malpractice.

To learn more about buying a home while in the bankruptcy process, see Buying a House While in Chapter 13.

I hope this information helps you Find. Learn & Save.