Control

• Federal bankruptcy courts tightly manage a debtor's assets and debts during bankruptcy, and entering into a land contract agreement during bankruptcy requires approval by the court. The debtor must obtain advice from an attorney -- unless the debtor is representing himself in the case -- and then make a formal request through the trustee assigned to the case. Debtors who secretly purchase property during a bankruptcy could face bankruptcy fraud or contempt of court charges.
  
  

Credit

• Purchasing a home in bankruptcy is difficult because most people in the situation lack enough cash for a down payment, and their credit scores are low. However, land contract agreements are sometimes available without a credit check or traditional down payments. The agreements are similar to rent-to-own contracts and are popular with sellers whose homes are tough to sell because of price, location or physical condition. The owner financing attracts buyers who cannot qualify for conventional loans, such as those in bankruptcy.
  
  

Chapter 7 Bankruptcy

• Chapter 7 bankruptcy lasts only a few months and is the quickest form of bankruptcy. A bankruptcy court is highly unlikely to allow the debtor to engage in a land contract while completing Chapter 7. With the entire process lasting just several months, the bankruptcy trustee would advise the debtor to wait until the completion of the bankruptcy to purchase a house through a land contract or conventional financing.
  
  

Chapter 13 Bankruptcy

• Chapter 13 bankruptcy, another form of personal bankruptcy, offers more flexibility for debtors seeking to purchasing a home through a land contract. Chapter 13 takes much longer to complete than Chapter 7 because of a payment plan lasting three to five years. During that time, the court forces the debtor to adhere to a court-monitored budget for reasonable living expenses but will allow the debtor to take on debt with permission. The court may grant approval if it is clear that the debtor can afford the monthly payments on the land contract and still adhere to the terms of the court-ordered payment plan to other creditors. Permission from the court to purchase a home during Chapter 13 is not unusual. FHA.com reports that even FHA loans are available to buyers in Chapter 13.