Purchasing a home in Kansas City, whether in the state of Kansas or Missouri, is already a difficult task for individuals with fairly decent credit.  Even if you pay your bills on time and do not have a substantial amount of debt, mortgage lenders may be hesitant to approve you for a home loan if your income isn’t high enough, or if you haven’t had the opportunity to pay off a large chunk of debt in the past.  This is often an issue for younger individuals who have not had the time to build credit.  Because the home loan process is already a tricky situation, individuals seeking to obtain a home loan during Chapter 13 bankruptcy proceedings are facing a tough uphill battle when trying to purchase the home of their dreams.

The Process for Seeking a Home Loan During Chapter 13 Bankruptcy

Overall, it is unlikely that a Chapter 13 debtor will be able to obtain a home loan during bankruptcy proceedings, as the United States Bankruptcy Court frowns upon taking on new debt while paying off old debt.  In order obtain a home loan, you will need to obtain the consent of the trustee managing your bankruptcy proceeding.  Your trustee will consider all factors demonstrating the need (or lack thereof) for obtaining a home loan.  Such factors include, but are certainly not limited to, the following:

  • How far along you are in your Chapter 13 bankruptcy proceeding and how much debt you have paid off;
  • Your ability to continue receiving sufficient income to satisfy your monthly Chapter 13 payments;
  • Whether or not it is in your best financial interest to take on a home loan, and the reasons why the debtor wishes to obtain a home loan;
  • The likelihood that you will be able to satisfy new monthly mortgage payments; and
  • The amount you wish to spend on a new home.

 Even if you are able to obtain the consent of your Chapter 13 bankruptcy trustee, you still have to get approval for your home loan.  Because your Chapter 13 bankruptcy is on your credit report, and this is evidence that you have had to deal with past unpaid debt, lenders may feel you are not creditworthy.  This does not necessarily mean that all Chapter 13 debtors will be denied a home loan.  However, if approved, the Chapter 13 debtor is facing very high interest rates that could lead to the same type of debt that led to bankruptcy in the first place.  To determine whether not applying for a home loan during Chapter 13 bankruptcy is a good idea for your particular financial situation, it is important to seek the advice of a bankruptcy attorney.

Contact Kansas City Bankruptcy Attorney Douglas Breyfogle to Schedule a Free Consultation

Choosing to file for bankruptcy is a very important life decision that requires thorough research and an extensive evaluation of your finances.  Depending on how much debt you have when filing for Chapter 13 bankruptcy, it may be very difficult to obtain new credit, such as a home loan, in the course of your Chapter 13 bankruptcy proceeding.  To determine if bankruptcy is right for you and whether or not obtaining a home loan during your bankruptcy proceeding is a good idea, it is essential to meet with a Kansas City Bankruptcy Attorney right away.  Each individual’s financial situation is different, so one debtor may be able to obtain a home loan during bankruptcy, while other debtors cannot.  To fully understand bankruptcy and how it affects your financial situation, contact Kansas City Debt Relief Attorney Douglas Breyfogle.  With more than twenty years of experience helping Kansas City debtors with the bankruptcy process, Douglas Breyfogle has the qualifications and skill to help you with your financial struggles.  To schedule your free confidential consultation, call our office today at (913) 742-8700.