Filing for bankruptcy can be a process full of uncertainty for some as many questions may arise. “How do I know if bankruptcy is right for me? Will bankruptcy really get rid of my debt? Am I going to lose everything during bankruptcy?” These are just a few of the many questions struggling debtors present when considering bankruptcy for debt relief. One of the most common questions is “Will I be able to purchase a home after bankruptcy?”
The broad answer is yes. If you were otherwise credit-worthy of purchasing a home, filing bankruptcy should only serve as a temporary setback, but other considerations do come into play. How soon you can buy a house after bankruptcy depends on whether you file Chapter 7 or Chapter 13 bankruptcy as each process entails specific proceedings.
Post-Bankruptcy Loan Approval
Being able to purchase a home ultimately comes down to your ability to secure a loan or your creditworthiness. Lenders will evaluate your credit score and repayment history to gauge the possibility of you defaulting on a loan. The lower risk you are to them, the more likely you are to get approved for a loan, the greater risk you are, the less likely you are to receive an approval. It is still possible for potentially high-risk consumers to get a loan approval; however, the interest rate on the loan is likely to be noticeably high.
Allow the following information to supply you with a general timeline as to when you can expect to receive a loan approval to purchase a home depending on which chapter you file.
Chapter 7
Those who file chapter 7 bankruptcy will generally be able to secure a traditional loan four years after and a Federal Housing Administration (FHA) insured mortgage two years after the discharge. Again, this is only if the individual has proven over time that he or she can sufficiently manage his or her finances.
Chapter 13
Chapter 13 filers can become eligible for a conventional loan two years after a discharge, the most favorable of which being FHA loans. Being that Chapter 13 bankruptcy involves the reorganization of debt contrary to the selling of assets to pay off debts, individuals can expect to continue making monthly payments for years to come.
During this time, pursuing a major transaction like financing a home loan is discouraged. If one would like to do so, he or she must get the consent of his or her court-appointed trustee. The trustee is most likely to approve such financial transactions if you have a 12-month consecutive period of timely monthly payments.
The seasoned bankruptcy attorneys at E. Orum Young Law Offices can advise you on the most appropriate chapter to file and serve as your legal counsel throughout the process. We’ve filed over 20,000 bankruptcies in Northeast Louisiana and can assure you that your financial future is in good hands. Contact us today for a free case evaluation. Our Trial Guarantee ensures that we will take your case to trial per your request.