Can I Buy a House While in Chapter 13 Bankruptcy in Texas?

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If you are in the middle of a Chapter 13 bankruptcy in Texas, you might think buying a home is off the table. The good news? It is possible — but it comes with specific requirements, waiting periods, and extra steps that regular buyers do not face.

This guide breaks down everything you need to know about buying a house while in Chapter 13 bankruptcy in Texas, including which loan programs allow it, what the trustee needs to approve, and how to set yourself up for success.

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What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a court-supervised repayment plan that lets you reorganize your debts over a period of three to five years. Instead of wiping out your debts entirely like Chapter 7, Chapter 13 lets you catch up on missed payments while keeping your assets — including your home, car, and personal property.

Under Chapter 13, you make monthly payments to a court-appointed trustee, who then distributes the money to your creditors according to the repayment plan. Once you complete the plan, any remaining eligible dischargeable debts are eliminated.

Chapter 13 stays on your credit report for seven years from the filing date, according to Experian. That is shorter than Chapter 7, which remains for ten years.

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Can You Buy a House While Still in Chapter 13?

The short answer: Yes, but with conditions.

You do not necessarily have to wait until your Chapter 13 case is fully discharged or dismissed to buy a home. However, you will need to meet several important requirements:

1. Trustee approval. Your bankruptcy trustee must approve the new mortgage payment as part of your revised budget. The trustee needs to see that taking on a mortgage payment will not prevent you from completing your repayment plan.

2. Court permission. In most cases, you need permission from the bankruptcy court to take on new debt during an active Chapter 13 plan. This means filing a motion with the court and showing that the new loan is necessary and that you can afford it.

3. Lender willingness. Not every lender will approve a mortgage for someone in an active Chapter 13. You will need to find a lender experienced with these situations.

4. On-time plan payments. Most programs require that you have made at least 12 consecutive on-time payments under your Chapter 13 plan before they will consider your application.

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Loan Options for Buyers in Active Chapter 13

FHA Loans — Your Best Option

FHA loans are generally the most accessible mortgage option for buyers in an active Chapter 13 bankruptcy. According to Experian, FHA loans require:

• One year from the discharge date for standard approval
• For those still in an active Chapter 13 (not yet discharged), you may be eligible after making at least 12 months of on-time plan payments with trustee approval
• Minimum credit score of 580 with a 3.5% down payment, or 500 with a 10% down payment
• Private mortgage insurance (PMI) is required

FHA loans are backed by the Federal Housing Administration, which makes lenders more willing to work with borrowers who have credit challenges — including active bankruptcies.

VA Loans

For veterans, active-duty service members, and eligible military families, VA loans offer another path. VA loan waiting periods for Chapter 13 mirror FHA requirements:

• One year of on-time payments under your Chapter 13 plan
• Trustee approval required
• No down payment required
• No PMI required
• A funding fee of up to 3.3% of the loan amount applies

USDA Loans

USDA loans, designed for rural and suburban homebuyers, also have relatively short waiting periods:

• One year from discharge date, or 12 months of on-time plan payments while still in Chapter 13
• Property must be in a USDA-eligible area
• Income must meet USDA limits
• No down payment required

Conventional Loans

Conventional loans are the toughest path for buyers in an active Chapter 13. According to Experian, conventional loans require:

• Two years from the discharge date or four years from the dismissal date
• Higher credit score requirements than government-backed loans
• Stricter debt-to-income ratio standards

In practice, if you are still in an active Chapter 13 and have not been discharged, conventional loans are very difficult to obtain. Most buyers in this situation should focus on FHA, VA, or USDA options.

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Waiting Periods at a Glance

Loan Type	While in Active Chapter 13	After Discharge	After Dismissal
FHA	12 months on-time plan payments + trustee approval	1 year from discharge	3 years from dismissal
VA	12 months on-time plan payments + trustee approval	1 year from discharge	3 years from dismissal
USDA	12 months on-time plan payments + trustee approval	1 year from discharge	3 years from dismissal
Conventional	Generally not available	2 years from discharge	4 years from dismissal

Sources: Experian, FHA Handbook, VA Lenders Handbook, Fannie Mae Selling Guide

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Steps to Buy a House While in Chapter 13 in Texas

Step 1: Build a Track Record of On-Time Payments

Before anything else, you need to show at least 12 consecutive months of on-time payments under your Chapter 13 repayment plan. This demonstrates to the trustee, the court, and potential lenders that you can manage your obligations responsibly.

Step 2: Get Trustee Approval

Your bankruptcy trustee must review your request to take on new debt. The trustee will examine:

• Your current income and expenses
• Whether the mortgage payment fits within your budget
• Whether the new debt would interfere with your repayment plan
• Whether buying a home makes financial sense for your situation

Be prepared to provide pay stubs, tax returns, and a proposed budget that includes the new mortgage payment.

Step 3: File a Motion With the Court

In most jurisdictions, including Texas bankruptcy courts, you must file a motion to incur debt with the bankruptcy court. Your bankruptcy attorney will help you prepare this filing. The court will schedule a hearing and either approve or deny the request.

Step 4: Find a Lender Experienced With Chapter 13

Not all lenders understand the nuances of financing a home purchase during an active Chapter 13. Look for lenders who specialize in:

• FHA loans during bankruptcy
• VA loans for veterans in Chapter 13
• Non-prime or alternative lending programs

Ask potential lenders directly: "Do you have experience closing mortgages for borrowers in active Chapter 13 bankruptcy?" If the answer is no, move on.

Step 5: Get Pre-Approved

Once you have trustee approval and court permission, get pre-approved with your chosen lender. This will give you a clear picture of:

• How much home you can afford
• What interest rate you qualify for
• What your monthly payment will look like
• What documents you need to finalize the loan

Step 6: Shop for a Home

With pre-approval in hand, you can start working with a real estate agent. Be upfront with your agent about your bankruptcy situation — they need to know so they can guide you to properties that will pass lender requirements and appraisal standards.

Photo by Daniel on Unsplash

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What Texas Buyers Should Know About the Local Market

If you are buying in the Austin metro area or elsewhere in Texas, here are some state-specific considerations:

• Texas is a non-disclosure state. This means sale prices of homes are not publicly recorded, which can make appraisals trickier. Work with an experienced local appraiser.
• Property taxes in Texas are high. Texas has no state income tax, but property taxes rank among the highest in the nation. Factor property taxes into your monthly housing budget when calculating what you can afford.
• Homestead exemption. Texas offers a homestead exemption that can reduce your property taxes if the home is your primary residence. Once you buy, make sure to file for this exemption with your county appraisal district.
• Chapter 13 in Texas courts. Texas has four bankruptcy districts: Eastern, Northern, Southern, and Western. Austin falls under the Western District. Each court may have slightly different local rules for motions to incur debt, so work with a local bankruptcy attorney.

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Rebuilding Your Credit During Chapter 13

Even while in Chapter 13, you can take steps to improve your credit:

• Make every plan payment on time. This is the single most important factor. Twelve consecutive on-time payments is the minimum threshold for most loan programs.
• Check your credit reports regularly. You can get free reports from all three bureaus at AnnualCreditReport.com. Make sure discharged debts are reported correctly.
• Consider a secured credit card. A secured card with a small limit can help you build a positive payment history. Use it for small purchases and pay the balance in full each month.
• Avoid new debt unless approved. Taking on new credit without trustee and court approval can jeopardize your Chapter 13 case. Always get permission first.
• Save for your down payment. Even FHA's 3.5% down payment requirement means you need savings. Start setting money aside as early as possible.

Photo by Jennifer Kalenberg on Unsplash

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Common Mistakes to Avoid

1. Skipping the trustee. Never take on new debt during Chapter 13 without your trustee's written approval. Doing so can result in your case being dismissed.

2. Applying with the wrong lender. Some lenders will run your credit, see the bankruptcy, and immediately deny you — leaving a hard inquiry on your report. Ask about Chapter 13 experience before applying.

3. Underestimating costs. Between the down payment, closing costs, property taxes, insurance, and moving expenses, buying a home costs more than just the mortgage. Make sure your budget accounts for everything.

4. Not working with a bankruptcy attorney. If you are in Chapter 13 and want to buy a home, you need legal guidance. A bankruptcy attorney can file the motion to incur debt and represent you at the hearing.

5. Rushing the process. Buying a home during Chapter 13 takes longer than a typical purchase. Plan for extra time at every step — trustee review, court approval, lender underwriting, and closing.

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Frequently Asked Questions

Can I buy a house while still making Chapter 13 payments?

Yes. FHA, VA, and USDA loans all allow you to buy a home during an active Chapter 13 if you have made at least 12 consecutive on-time plan payments and have trustee and court approval.

Will bankruptcy stop me from getting a mortgage in Texas?

No, but it will limit your options and require a waiting period. Government-backed loans (FHA, VA, USDA) have shorter waiting periods than conventional loans.

How long does Chapter 13 stay on my credit report?

Chapter 13 bankruptcy remains on your credit report for seven years from the filing date, according to Experian. Chapter 7 stays for ten years.

Do I need my bankruptcy trustee's permission to buy a house?

Yes. In an active Chapter 13 case, you must get your trustee's approval and file a motion with the bankruptcy court before taking on a new mortgage.

Can I get an FHA loan during Chapter 13?

Yes. FHA allows borrowers in active Chapter 13 to qualify after 12 months of on-time plan payments, with trustee approval and court permission. You also need a minimum credit score of 580 (with 3.5% down) or 500 (with 10% down).

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The Bottom Line

Buying a house while in Chapter 13 bankruptcy in Texas is challenging but achievable. The key is understanding the process, working with the right professionals, and being patient. If you have been making your plan payments on time and have built a stable financial foundation, homeownership can be part of your recovery journey.

Need help navigating the home-buying process in Texas? Whether you are in Chapter 13, recovering from bankruptcy, or just starting to explore your options, a knowledgeable local real estate agent can guide you through every step. Reach out today to start the conversation.

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Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Bankruptcy laws are complex and vary by jurisdiction. Always consult with a qualified bankruptcy attorney and a licensed mortgage lender before making decisions about buying a home during bankruptcy.

Sources: Experian (credit reporting and mortgage waiting periods), U.S. Bankruptcy Code (Chapter 13 provisions), FHA Single Family Housing Policy Handbook, VA Lenders Handbook, Fannie Mae Selling Guide.