Having a bankruptcy filing on your financial record may make you feel like your opportunity to live in financial normalcy will never happen. However, the reality is that bankruptcy does not impact your credit score forever, meaning you can return to a state of financial stability and even purchase a home. However, how soon after depends on the steps you take. The Jones Law Firm explains.
How Chapter 7 Vs. Chapter 13 Impact How Quickly You Can Buy a Home After Bankruptcy
The first step in buying a home after bankruptcy is securing a loan which you cannot do until a judge has discharged your bankruptcy. How long that takes however depends on the type of bankruptcy you filed for.
Considered the most common type of bankruptcy, Chapter 7 filings clear away qualifying debts--while also impacting your credit score. In most cases, you will need to wait a minimum of four years after your Chapter 7 bankruptcy
has been discharged or dismissed to qualify for a conventional loan. Conventional loans are mortgage loans that are not backed by a government agency. These loans follow the lending rules of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. In some cases, you may qualify for a government-backed loan and only need to wait three years after discharge or dismissal. If you qualify for a VA
loan, it will only require two years of waiting after Chapter 7 bankruptcy.
Unlike Chapter 7 bankruptcy, which is a liquidation of debts, Chapter 13 is a reorganization of debts so you can come up with a feasible schedule to make payments. In addition, because you retain assets, Chapter 13
filings do not have as much of an impact on your credit score. But, you still have a waiting period on most types of loans. How soon after you can apply and receive a loan after bankruptcy will depend on how the case is handled. If the court dismisses your Chapter 13 bankruptcy, you have to wait at least four years from your dismissal date before you can apply. If a court discharges your bankruptcy, the waiting period is typically four years from the date you filed and two years from your dismissal date. Like Chapter 7 bankruptcy loan requirements, to get a government-backed loan after Chapter 13 bankruptcy is more flexible and only requires a one year waiting period and is the same whether the case is discharged or dismissed. There is no waiting period for FHA and VA loans--only the court must dismiss or discharge your loan before you apply. Under both Chapter 7 and Chapter 13, you need to know that there are no rules stopping you from getting a mortgage, it just really depends on your credit score and financial situation following the bankruptcy. But The Jones Law Firm can help you navigate life after bankruptcy.
The Jones Law Firm: Columbus, Central Ohio, and Franklin County Bankruptcy Attorney
Bankruptcy impacts your life for the better and we can help. When it comes to filing for bankruptcy in Columbus and central Ohio, you need to know what options are available to you and that you can move forward after a bankruptcy filing--including buying a new home! If you are facing debts you can’t pay and are considering bankruptcy, learn more about how The Jones Law Firm can help you or contact us
for a free consultation about your options.