Can You Buy a Home in Washington While in an Active Bankruptcy?

Before We Begin: A Quick (But Important) Note

Real estate decisions involving bankruptcy, foreclosure risk, divorce, probate, or other financial or legal stressors can vary widely based on timing, documentation, and individual circumstances. The information shared here is for general educational purposes only and is not legal, tax, or financial advice.

If you are currently represented by a real estate agent, please contact your agent directly. For legal guidance, speak with a qualified Washington attorney. For loan guidance, consult a licensed mortgage professional.

My goal is to help you understand how this typically works in Washington — so you can make informed decisions without unnecessary stress or costly missteps.

Can You Buy a Home in Washington While in an Active Bankruptcy?

If you’re in the middle of a bankruptcy and quietly wondering whether homeownership is completely off the table, you’re not alone. This is one of the most common questions I hear from buyers across Pierce County, Tacoma, and from families relocating around JBLM.

The honest answer isn’t a simple yes or no.

In some cases, buying a home during an active bankruptcy is possible in Washington. In many cases, it isn’t. And understanding the difference early can save you time, money, and emotional energy.

This post breaks down what “active bankruptcy” really means, when buying might be allowed, and when waiting is actually the smarter move.

1. Why This Question Comes Up So Often

Bankruptcy often happens during major life transitions — divorce, job loss, medical debt, business challenges, or military moves. For many people, it’s a financial reset, not a failure.

The confusion usually starts when buyers hear conflicting advice:

• “You absolutely can’t buy a house during bankruptcy.”

• “It’s fine — lenders do this all the time.”

Both are oversimplified and often wrong.

In Washington, buying during bankruptcy depends on bankruptcy type, court oversight, and lender rules — all working together.

2. What “Active Bankruptcy” Means in Real Life

An active bankruptcy means your case is still open and has not been discharged or dismissed.

Typically, that means:

• A trustee is overseeing your finances

• Major financial decisions are restricted

• Large purchases may require court approval

Buying a home during this period isn’t just a real estate decision — it’s also a legal and financial one.

3. Chapter 7 vs Chapter 13: The Line That Changes Everything

This distinction matters more than almost anything else.

Chapter 7 Bankruptcy

• Usually lasts 3–6 months

• Designed to eliminate unsecured debt

• Buying during an active Chapter 7 is extremely rare

Most lenders require you to wait until after discharge. In practice, nearly all buyers in Chapter 7 are better served by planning rather than purchasing immediately.

Chapter 13 Bankruptcy

• Lasts 3–5 years

• Involves court-approved repayment plans

• Some lenders may allow buying during an active Chapter 13

This is where “no” sometimes becomes “maybe” — but only under strict conditions.

(We’ll break this down much deeper in the next blog in this series.)

4. When Buying During an Active Bankruptcy May Be Allowed

In Washington, buying a home during an active bankruptcy generally requires all of the following:

• You are in Chapter 13, not Chapter 7

• At least 12 months of on-time trustee payments

• Written trustee approval for the purchase

• A lender willing to do manual underwriting

• A housing payment that is clearly affordable

This is not common — and it’s not automatic — but it does happen in specific, well-documented situations.

5. What Trustee Approval Actually Looks Like

If you’re in Chapter 13, the trustee’s role is to protect long-term financial stability — not just approve purchases.

They typically review:

• Your purchase contract

• A lender pre-approval letter

• Proof the new payment fits comfortably within your budget

Without trustee approval, a transaction cannot move forward — even if the seller is willing and the lender is supportive.

6. The Lender Piece Most Buyers Don’t Expect

Even when buying is legally allowed, many lenders still say no.

Common lender restrictions include:

• No lending during an active bankruptcy

• Manual underwriting requirements

• Lower debt-to-income thresholds

• Extra scrutiny of income stability

This is why timing and strategy matter so much. Many buyers are better served by preparing for a strong post-bankruptcy purchase, similar to the planning approach outlined in
The Step-by-Step Move-Up Buyer Plan: How to Sell Your Current Home & Buy Your Next One Smoothly in Washington (2025 Guide)
 

7. Why Waiting Can Be the Smarter Financial Move

Even if buying is technically allowed, it’s not always the best choice.

Waiting until after discharge often means:

• Better interest rates

• More loan program options

• Lower down payment pressure

• Stronger negotiating power

I’ve seen buyers rush during an active bankruptcy only to feel boxed in later by higher costs and limited flexibility.

8. Common Myths That Create Real Problems

Let’s clear a few things up:

• Myth: Bankruptcy permanently disqualifies you from buying
  Truth: Timing and bankruptcy type matter far more

• Myth: You should hide your bankruptcy from sellers
  Truth: Surprises later can derail contracts

• Myth: A pre-approval always means you’re safe
  Truth: Some approvals don’t survive underwriting

9. When Bankruptcy Overlaps With Other Life Changes

Many buyers navigating bankruptcy are also dealing with:

• New employment

• Student loans

• Relocation

These situations often intersect, which is why these posts are helpful companions:

• Can You Buy a Home in WA with Student Loans? (What Lenders Actually Look At)

• Can You Buy a Home in WA with a New Job? (Rules, Timelines, Exceptions)

10. How I Help Buyers Think Through This

I always start with clarity, not pressure:

1. What chapter are you in?

2. How far along is your bankruptcy?

3. What problem are you trying to solve by buying now?

Sometimes buying immediately makes sense. Other times, the real win is creating a six-to-twelve-month plan that puts you in a much stronger position.

11. Where This Fits in the Series

This post answers one core question:
Is buying a home during an active bankruptcy even possible in Washington?

Next in the sequence:

• Chapter 7 vs Chapter 13 in Washington: How Each Impacts Buying or Selling a Home

• Buying a Home After Bankruptcy in Washington: First-Year Planning Mistakes to Avoid

• Rebuilding Credit to Buy a Home in Washington: A Practical 6–12 Month Game Plan

Each post builds forward — without repeating the same information.

12. Final Thoughts

Bankruptcy doesn’t erase your future — but decisions made during it carry long-term weight. The goal isn’t just buying a home. It’s buying one in a way that supports stability, not stress.

If you’re navigating bankruptcy and trying to understand your real housing options in Washington, thoughtful planning makes all the difference.

If you're planning a move in Washington, I’d love to help you create a plan that actually makes sense for your timeline and budget.

 Written by: Lani Fisher — Washington Realtor Helping Everyday Buyers & Sellers With Confidence