Chapter 7 vs Chapter 13 in Washington: How Each Impacts Buying or Selling a Home
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, court requirements, 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 with clarity and confidence.
Chapter 7 vs Chapter 13 in Washington: How Each Impacts Buying or Selling a Home
If you’re dealing with bankruptcy and trying to make sense of your housing options, the type of bankruptcy you’re in matters more than almost anything else.
I see this confusion constantly across Tacoma, Pierce County, and with military families relocating near JBLM:
People know they “filed bankruptcy,” but they don’t fully understand how Chapter 7 and Chapter 13 create very different real estate outcomes.
This post breaks down how each chapter impacts:
Buying a home
Selling a home
Timing, approvals, and lender expectations
1. Why Chapter Type Matters So Much in Washington Real Estate
Chapter 7 and Chapter 13 are not interchangeable — especially when real estate is involved.
From a housing perspective, the bankruptcy chapter determines:
Whether you can buy or sell during an active case
Who must approve the transaction
How lenders view your risk
How much flexibility you actually have
If you only remember one thing from this post, remember this:
Chapter type sets the rules of the game.
2. Chapter 7 Bankruptcy: How It Affects Buying or Selling a Home
What Chapter 7 Is Designed to Do
Chapter 7 is a liquidation bankruptcy meant to wipe out unsecured debt and give someone a financial reset.
It is usually:
Short-term (about 3–6 months)
Highly restrictive while active
Focused on asset review
Buying a Home During Chapter 7
In Washington, buying a home during an active Chapter 7 is extremely rare.
Most lenders:
Will not approve a mortgage until after discharge
Require waiting periods post-discharge
View new debt during Chapter 7 as high risk
For most buyers, Chapter 7 is a pause-and-plan phase, not a purchase phase — which is why many start with the clarity covered in
Can You Buy a Home in Washington While in an Active Bankruptcy?
Selling a Home During Chapter 7
Selling can be possible, but:
The trustee may need to approve
Equity matters significantly
Proceeds may be used to satisfy creditors
This becomes especially important when timing matters or when sellers are trying to avoid deeper financial consequences.
3. Chapter 13 Bankruptcy: How It Changes the Rules
What Chapter 13 Is Designed to Do
Chapter 13 is a court-approved repayment plan that typically lasts 3–5 years.
It is:
Structured
Payment-based
Focused on long-term stability
Buying a Home During Chapter 13
This is where buying sometimes becomes possible.
In Washington, buying during an active Chapter 13 may be allowed if:
You’ve made at least 12 months of on-time payments
The trustee approves the purchase
The lender allows manual underwriting
The new housing payment is clearly affordable
Even then, approvals are narrow and highly scrutinized.
4. Selling a Home During Chapter 13
Selling a home during Chapter 13 is often more flexible than Chapter 7 — but still not simple.
Key considerations include:
Trustee approval
How sale proceeds will be applied
Whether the sale improves your financial position
This topic ties closely into distress-sale decisions, which I cover more deeply in
The Step-by-Step Move-Up Buyer Plan: How to Sell Your Current Home & Buy Your Next One Smoothly in Washington (2025 Guide)
5. How Lenders View Chapter 7 vs Chapter 13
From a lender’s perspective:
Chapter 7 = higher short-term risk, strict waiting periods
Chapter 13 = managed risk, but only with strong payment history
Many buyers are surprised to learn that:
Chapter 13 can sometimes be viewed more favorably than expected
Chapter 7 often requires patience, not perfection
This is why pre-approvals during bankruptcy need to be taken cautiously.
6. Timing Mistakes That Cost Buyers and Sellers
Some of the most common mistakes I see:
Trying to buy too early in Chapter 7
Listing without trustee approval
Assuming all lenders follow the same rules
Not understanding how proceeds will be treated
These mistakes are avoidable — but only with the right information up front.
7. When Bankruptcy Overlaps With Other Financial Factors
Bankruptcy rarely happens in isolation. Many buyers and sellers are also dealing with:
Student loans
Employment changes
Relocation
If that’s you, these posts help fill in the gaps:
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)
8. How I Help Clients Navigate This in Real Life
I don’t start with pressure or promises. I start with clarity:
Which chapter are you in?
Is your case active or discharged?
Are you trying to buy, sell, or stabilize first?
Sometimes the right move is action. Other times, the smartest move is patience paired with a clear plan.
9. How This Fits in the Buyer Recovery Sequence
This post is step two in the buyer recovery path:
Can you buy during an active bankruptcy?
How Chapter 7 vs Chapter 13 changes everything
Buying after bankruptcy: first-year mistakes
Rebuilding credit with a realistic timeline
Each post answers a different question — without repeating the same information.
10. Final Thoughts
Chapter 7 and Chapter 13 are not just legal labels — they shape what’s realistic, what’s risky, and what’s worth waiting for when it comes to housing in Washington.
Understanding the difference early gives you back control — and helps you avoid decisions that create more stress instead of relief.
If you're planning a move in Washington and navigating bankruptcy, 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