A Chapter 13 Bankruptcy (repayment plan) does not have to be discharged and you can buy a new or a resale home as long as you have been in the Chapter 13 Bankruptcy for at least 12 months and your chapter 13 payments have been made on time for at least one full year, although you may wish to check with a Sacramento bankruptcy attorney first. Lenders like to see that you have re-established credit while in the Chapter 13. However if you have not re-established credit, lenders will s ometimes use alternative credit. Alternative credit will sometimes include utility bills, insurance bills, cell phone bills, etc.
It’s important for lenders to see that you have a strong payment history while you are trying to re-establish your credit. Word of Caution- Assuming that you establish new credit while in the Chapter 13, you can never have any late payments. Lenders frown on late payments, returned checks and NSF during this process.And finally, after you have been given loan approval by the lender your trustee has the final word in determining if he/she will give you approval to buy a home. The trustee will request a list of all your financial obligations outside of your Bankruptcy payment and will make a determination based on your ability to make the mortgage payment.
Keep in mind, while in a Chapter 13 all major purchases, including the purchase of your home, must be approved by the trustee in charge of the Bankruptcy. Prior to calling a Realtor make sure you have taken a good look at your credit report. Often times items that should have been included in the Bankruptcy still shows on your credit report as a bad debt. Here’s to hoping that you’re able to find the house of your dreams even with bad credit.