Getting a Mortgage After Bankruptcy

mortgage concept and completing wooden

Filing for bankruptcy can be an effective means of managing debt that’s become more than you can bear. You’ll benefit from debt relief and a fresh financial start. You’ll be able to stop debt collectors from harassing you, taking action against you, and repossessing your property.

On the downside, however, you’ll have a mark on your credit. This will hurt your ability to obtain loans and credit cards in the short term. It’s good to understand how bankruptcy will affect your ability to secure a mortgage down the road.

Bankruptcy law is incredibly complex. Loan Lawyers is a foreclosure defense, debt defense, and bankruptcy law firm with consumer rights attorneys who fully understand the process and its ramifications. Call us now and take the first and most important step toward regaining your peace of mind and financial stability.

How Soon After Bankruptcy Could I Get a Mortgage?

Getting a mortgage after bankruptcy can present some challenges. Much depends on the chapter under which you filed, according to Experian, which is one of the nation’s major credit bureaus.

Bankruptcy can significantly lower your credit score, remain on your credit reports, and affect your ability to obtain new credit – including a mortgage loan. The impact can continue for up to 10 years. Fortunately, its impact lessens over time.

You should check your credit report before you apply for a home loan to make sure it’s accurate. Contact the credit agencies promptly and dispute any errors.

Here’s a quick summary of how long you have to wait to apply for a post-bankruptcy mortgage:

Chapter 7: Liquidation

This type of bankruptcy will stay on your credit report for up to 10 years. However, you may still be able to get a mortgage during that time. You’ll need to wait until enough time has passed since your bankruptcy was discharged.

Chapter 11: Reorganization

This is typically used by businesses but can be filed by individuals under certain circumstances. It’s complex and expensive. After your Chapter 11 has been discharged, you should be eligible for a mortgage.

Chapter 13: Adjustment of Debts

This gives you the chance to repay your debts over three to five years. It can stay on your credit report for up to seven years.

Take time to research the different types of loans. Each mortgage loan has its own unique requirements.

Tips for Getting a Mortgage After Bankruptcy

If you plan to seek a mortgage after bankruptcy, start by rebuilding your credit before you apply. It may improve your chances of approval and get you more favorable terms.

Use these strategies to put yourself into a position to successfully secure a mortgage:

  • Create a budget.
  • Pay your bills on time.
  • Get a secured credit card.

Mortgages: Chapter 7 versus Chapter 13

Buying a home after bankruptcy can be achieved. It’s helpful to understand Chapter 7 versus Chapter 13.

With a Chapter 7 filing, also known as a liquidation bankruptcy, you’ll have to sell your possessions to pay toward credit card debt, medical bills, personal loans and other types of unsecured debts. Chapter 7 is generally meant for people with limited incomes who lack the ability to pay back their debts.

Although it will stay on your credit report for up to 10 years, you may still be able to get a mortgage. You’ll need to wait until enough time has passed since your bankruptcy was discharged and make sure you have a substantial down payment and that you’ve worked on rebuilding your credit score.

Chapter 13 is referred to as a reorganization bankruptcy. Your property is not sold when you file for Chapter 13 protection. If you successfully complete a court-mandated repayment plan, you may be able to keep your property.

After completing the repayment plan in which you pay your creditors a portion of the outstanding debt over a fixed period of time, any remaining unsecured debts may be discharged. This means you’re no longer required to pay back the debt.

The federal Bankruptcy Code covers nearly every aspect of the process. You need seasoned attorneys who have your best interest at heart. To get the help you need, call Loan Lawyers, a foreclosure defense, debt defense and bankruptcy law firm.