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Impact of Chapter 13 on buying or renting a home

On Behalf of | Sep 28, 2017 | Chapter 13 Bankruptcy

Applying for Chapter 13 bankruptcy in Texas will impact an individual’s credit report and may present challenges when it comes to renting or purchasing a home. In most cases, though, it will still be possible to find a place to live in a desirable area even as an individual’s debts are restructured and paid down. Depending on the specifics of the situation, a person may be able to purchase a new home after filing for Chapter 13 protection.

Chapter 13 bankruptcy is sometimes referred to as wage earner’s bankruptcy. It is an option for many people who cannot afford to pay off their debts even though they have steady, reliable sources of income. The process involves submitting a repayment plan that covers between three and five years, whereby the individual can pay off some or all of their debts. Chapter 13 is available to people who have secured debts of less than $1,184,200 and unsecured debts of less than $394,725.

Individuals who would like to rent a home during a Chapter 13 case can begin by drafting a letter that explains the situation to potential landlords. According to a realtor with Coldwell Banker Residential Brokerage, many landlords are used to seeing bankruptcies, and it can be a good idea to explain in writing how the bankruptcy came to happen.

For those who want to buy a home during Chapter 13 bankruptcy, applying for a mortgage from the Federal Housing Administration might be worthwhile. Lenders can approve FHA loans to Chapter 13 debtors if certain requirements are met. In the U.S. today, one-third of all bankruptcy filings are made under Chapter 13. An attorney might be able to help individuals in Texas who are struggling with debt by suggesting options to reduce or eliminate outstanding balances. An attorney with experience in bankruptcy law may be able to guide the client through the Chapter 13 bankruptcy process or help draft a repayment plan likely to be approved by the court.