The Short Answer
Yes, you can buy a house while in Chapter 13. But you cannot do it on your own. Because you are in an active bankruptcy case, you must first ask the court for permission by filing a motion to incur new debt. The court checks that the new mortgage payment is reasonable and that you can still afford your plan. If the numbers work, the court will often approve it.
Maybe you are in the middle of a Chapter 13 plan, and something changed. Your family grew. Your rent went up. You found a house you love. Now you are wondering if you can buy a home before your case is finished.
This is a very common question. And the good news is that buying a house while in Chapter 13 is possible. But there are some important steps you must follow first.
This article explains how it works, what the court needs from you, and what North Carolina homebuyers should know.
The Short Answer
Yes, you can buy a house while in Chapter 13. But you cannot just go out and do it on your own. Because you are in an active bankruptcy case, you must first ask the court for permission. This is done by filing something called a "motion to incur new debt."
The court wants to make sure the new mortgage payment is reasonable and that you can still afford your Chapter 13 plan. If the numbers work and the purchase makes sense, the court will often approve it.
Watch This Video
Attorney Damon Duncan explains this topic in the video above.
Why You Need Court Permission
When you file Chapter 13 bankruptcy, you agree to a repayment plan that lasts three to five years. During that time, the court watches your finances closely.
Taking on a big new debt, like a mortgage, affects your plan. That is why you cannot borrow large amounts of money without asking first.
The tool you use is called a motion to incur new debt. It tells the judge and the trustee:
- How much you want to borrow
- What the monthly payment will be
- The interest rate and loan terms
- Why the purchase is reasonable
Your bankruptcy attorney usually files this motion for you.
What the Court Looks At
The court is not trying to stop you from owning a home. It just wants to protect your plan and your creditors. The judge usually asks a few simple questions.
Can you still afford your plan?
The new house payment cannot wreck your Chapter 13 budget. If buying the home means you can no longer pay your creditors, the court may say no.
Is the loan reasonable?
The interest rate and terms should be fair. A loan with a sky-high rate or strange terms may raise concerns.
Does the purchase make sense?
The court looks at whether the home is a reasonable and necessary expense, not a luxury. Buying a modest home for your family is very different from buying a vacation property.
Federal courts have made clear that your plan must also be proposed in good faith. Spending money on luxury items while paying your creditors very little can cause problems. The same idea applies when you ask to take on new debt.
How the Process Usually Works
Here is what the path to buying a home during Chapter 13 often looks like.
- Talk to your attorney first. Before you shop, let your lawyer know your plans.
- Find a lender that works with Chapter 13 buyers. Some lenders offer loans to people who are still in an active plan. FHA and VA loans are common options.
- Get pre-approved. The lender reviews your income and credit and tells you what you may qualify for.
- File the motion to incur new debt. Your attorney files this with the court. It includes the loan details.
- Wait for approval. The trustee and any creditors get a chance to respond. If there are no objections and the numbers work, the judge usually signs off.
- Close on the home. Once you have court approval, you can finish the purchase.
This process takes time, so start early and be patient.
What North Carolina Homebuyers Should Know
North Carolina has one of the highest Chapter 13 filing rates in the country. In the Middle District of North Carolina, more than half of all bankruptcy cases are Chapter 13. The trustees and judges here see these cases every day.
That experience can work in your favor. The local courts understand that life changes during a three to five year plan. People get married, have children, and sometimes need a different place to live.
Still, North Carolina courts expect you to follow the rules. You must get approval before taking on a Chapter 13 mortgage in North Carolina. Skipping this step can put your whole case at risk.
It also helps to know that North Carolina is an "opt-out" state for exemptions. That means you must use North Carolina's exemption laws, not the federal ones. The state homestead exemption protects up to $35,000 of equity in your home, or up to $60,000 if you are 65 or older and meet certain conditions. Your attorney can explain how this affects your plan.
Chapter 7 vs. Chapter 13: Buying a Home
People sometimes mix up the two main types of bankruptcy. Here is a simple comparison of how each one affects buying a house. If you are still deciding between them, our guide on Chapter 7 vs. Chapter 13 can help.
| Issue | Chapter 7 | Chapter 13 |
|---|---|---|
| How long does the case last? | A few months | Three to five years |
| Can you buy a home during the case? | The case is usually too short to buy during it; most people wait until it closes | Yes, with court approval through a motion to incur new debt |
| Do you need court permission? | Not after the case closes | Yes, while the plan is active |
| Waiting period for a new mortgage after the case | Often two years for FHA loans | You may qualify during the plan with approval |
Every situation is different. A Chapter 7 bankruptcy case is short, so most people simply wait until it ends before buying. Chapter 13 lasts longer, so the court built in a way to ask for permission.
What Should You Do Next?
If you want to buy a home during your Chapter 13 plan, here are some calm, useful steps to take.
- Tell your attorney before you start shopping. This avoids surprises and saves time.
- Check your budget honestly. Make sure you can handle a mortgage and your plan payment.
- Look for lenders who work with Chapter 13 buyers. Ask about FHA and VA loan options.
- Get pre-approved before filing the motion. The court needs real loan details.
- Be patient. The approval process takes a little time, but it is worth doing right.
Not sure if bankruptcy is even the right path for you? Our page on whether you need bankruptcy is a good place to start.
Talk to Duncan Law
If you are in a Chapter 13 plan in North Carolina and you want to buy a home, you do not have to figure it out alone. Duncan Law can review your budget, explain the motion to incur new debt, and help you take the right steps.
You can schedule your free consultation online, or call the office nearest you:
- Greensboro: (336) 856-1234
- Charlotte: (704) 563-1224
- Winston-Salem: (336) 245-4294
- Asheville: (828) 348-5252
- High Point: (336) 294-5800
- Salisbury: (704) 297-4000
Duncan Law serves clients throughout North Carolina, including Greensboro, Charlotte, Winston-Salem, Asheville, High Point, Salisbury, and nearby communities.
Frequently Asked Questions
Yes. Many people buy homes during their Chapter 13 plan. You just need court permission first through a motion to incur new debt.
It is a written request asking the bankruptcy court for permission to take on a new loan. It includes the loan amount, the payment, and the terms.
No. The court approves it only if the loan is reasonable and you can still afford your plan. If the purchase hurts your creditors, the judge may say no.
It varies. Once your attorney files the motion, the trustee and creditors get time to respond. The whole process often takes a few weeks.
Yes. Some lenders work with Chapter 13 buyers. FHA and VA loans are common choices. You usually need to be current on your plan payments.
This is risky. Buying a home without permission can put your case in danger and may even lead to dismissal. Always ask first.
In most cases, yes. Lenders and the court want to see that you have followed your plan and made your payments on time.
Yes. Lenders still look at your credit and income. Many people in Chapter 13 can still qualify, especially for government-backed loans.
Possibly, but you need court approval to sell certain property. North Carolina rules require approval before selling non-exempt property worth over a set amount. Talk to your attorney first.
Yes. Speaking with a bankruptcy attorney early helps you avoid mistakes and makes the approval process smoother. You can book a free consultation to get started.
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Key Takeaways
- You can buy a house during Chapter 13 with the court's permission first.
- A motion to incur new debt asks the judge to approve your new home loan.
- The court checks that you can still afford your Chapter 13 plan payment.
- FHA and VA loans are common options for buyers still in a Chapter 13 plan.
- Buying a home without court approval can put your whole case at risk.
- You usually must be current on your plan payments before you can buy.
Attorney Insight
In my experience, clients are surprised they can buy a home during Chapter 13. The key is telling your attorney early so we can file the motion and keep your plan on track.
