Can I Purchase a Home While in a Chapter 13 Bankruptcy?
You can in fact purchase a home while in an active Chapter 13 bankruptcy. As with any debt/loan you attempt to incur while in bankruptcy, you must file a Motion to Borrow/Incur with the court and provide sales contract for home. The Chapter 13 Trustee has guidelines that are followed to ensure that each debtor is treated fairly. The monthly payment of the new home can not increase more that 20% above your current monthly rent or mortgage payment.
For example, if your current rent/mortgage payment is $925 per month, then the trustee will usually approve a payment that does not exceed $1110 per month. However, updated schedules to reflect current income and expenses must be filed with updated pay stubs to prove that you can maintain all monthly obligations, monthly trustee payment, and the increased mortgage payment.
If you choose to purchase a home loan that exceeds the 20% increase, then it will be likely that you will have to testify at a hearing before the Judge to justify how you can afford the increase. Testifying to this can offer proof of a significant increase in your monthly household income since filing a Chapter 13 Bankruptcy case. If this occurs, then the Chapter 13 Trustee may require your plan-payment to increase in order to pay more funds to your unsecured creditors.
The Chapter 13 Trustee’s office reviews each request to incur debt for a home on a case by case situation. There is a fee to file the Motion to Incur Debt, so you will need to contact your Attorney’s office to get specific for your District you filed in.
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