Chapter 7 bankruptcy is the simplest form of bankruptcy and is often completed in as little as 90 days, according to the United States Bankruptcy Court for the Western District of Texas. Chapter 7 wipes out all unsecured debt such as credit cards, but causes great harm to credit scores in the process. Mobile home financing in Texas during a Chapter 7 bankruptcy is virtually impossible because of the nature of the Chapter 7 process.
Purpose
The U.S. Bankruptcy Court for the Western District of Texas reports that Chapter 7 is a "straight" bankruptcy for the purposes of liquidating assets to pay creditors. Texas law allows debtors to keep certain personal property during Chapter 7, including primary residences and automobiles below a certain value. People in Texas with a variety of assets, such as vacation homes, could lose the property to liquidation in Chapter 7.
Trustee
A bankruptcy official called a trustee oversees a debtor's filing for Chapter 7 in Texas. The trustee receives a list of all the debtor's assets and debts and warns against taking on new credit or disposing of assets during the process. This is also discussed during mandatory precounseling sessions with nonprofit credit counseling agencies in Texas approved by the U.S. Trustee Program, a part of the U.S. Justice Department.
Lenders
Banks, credit unions, mortgage companies and other lenders in Texas make their own lending decisions independent of the bankruptcy court. However, it is unlikely that any Texas lender would make a mobile home loan to a borrower who is in the middle of a Chapter 7 bankruptcy filing. Chapter 7 filings appear on credit reports after the official bankruptcy application and remain on reports for 10 years. Also, a Texas debtor in Chapter 7 bankruptcy is unlikely to have a credit score sufficient for approval on a mobile home loan.
Fraud
People secretly trying to finance a mobile home during Chapter 7 in Texas could face bankruptcy fraud charges. For example, a borrower in Chapter 7 could secretly agree to purchase a home through private financing offered by the seller. However, making side deals for credit during Chapter 7 could lead to a dismissal of the Chapter 7 filing as well as possible fraud or contempt of court charges. The U.S. Bankruptcy Court for the Western District of Texas notes that one purpose of bankruptcy is to treat all of the debtor's creditors fairly. That means the court would not allow the debtor to take on a new credit obligation during Chapter 7 -- such as a loan for a mobile home -- while debts from other creditors are eliminated during the proceedings.
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