Filing for Chapter 13 bankruptcy may put an end to creditor calls, wage garnishments and other negative effects of falling behind on your bills. However, it may also complicate the process of buying a home. Although you can purchase a home in Tennessee while your case is ongoing, your options may be limited. This is because you’ll need to get approval from the court as well as find a lender willing to provide a mortgage.
Consulting with the trustee
Your trustee must make sure that taking on a mortgage won’t interfere with your ability to keep up with plan payments. The trustee will also have to ensure that buying real property won’t have any impact on your chances of discharging some or all of your debt after the repayment period ends. Finally, the trustee may need to consult with your creditors to determine if there are any objections to the proposed purchase.
Finding a lender
It is nearly impossible to get an FHA loan while your Chapter 13 case is ongoing. This is because FHA rules state that you must be at least a year removed from your case before you qualify for a loan. A conventional lender may be scared away by your credit score as well as the presence of a bankruptcy on your credit report. Your best option may be a private lender who is willing to craft terms that meet your needs.
In addition to a mortgage, filing for bankruptcy may make it harder to get car loans, credit cards or other forms of credit. However, it may allow you to secure your financial future as you’ll be able to build an emergency fund or otherwise rely less on credit cards that carry high interest rates.