Tips for Getting a Home Loan While in Chapter 13 Bankruptcy

Make no mistake about it - if you are currently in Chapter 13 and are looking for a mortgage, you are in a bit of trouble. Most companies will probably tell you to take a hike once they realize the situation, and there is no way that you can hide your situation from them.

Difficulty does not equal impossibility however; in this article we will provide you with some tips for getting credit for a home loan while you’re in Chapter 13 Bankruptcy.

• Sell your current home . Remember, Chapter 13 involves a written plan and by following this plan you will eventually pay off your creditors. You don’t have to sell your property in order to pay off the debts, there is no liquidation involved.

  Moreover, your creditors can make no attempt to gain money from you outside of the bankruptcy court; you are probably much freer than you realized.

  Since you still have assets, it makes sense to make them work for you. If you are lucky enough to already own a home, you can sell it and use the equity as a down payment on a new home.

  This should be a sign to most lenders that although you are in a Chapter 13 Bankruptcy, you can still handle a mortgage.

• Explore different lending sources . Of course, if you don’t already own a home getting credit will be really difficult. During the introduction we stated that most companies will tell you to take a hike when you are in Chapter 13 and are looking for a home loan - but that doesn’t mean everyone will.

  The first place to start is with friends and family; they might be able to extend you some credit for a house purchase. Failing this, look around at different lending companies.

  Not all will say no; some specialize in this type of situation and will extend you the credit you need.

• Find a co-signer . There are other options when it comes to family and friends beyond the actual lending of money.

  You may be able to get the credit you need to buy through the help of a co-signer. This will mean that the individual who agrees to co-sign will be responsible for the debt should you default.

Remember that being in Chapter 13 is a long process, usually from 3 to 5 years. That is plenty of time to clean up your act and put a new plan in place, one which will allow you to apply for and be able to pay loans on a house.

The most important part of the process will be shaping a plan by which you can ensure creditors that you are once again a safe person to extend credit to.