Helpful Guide in Buying a Home after Bankruptcy

Many people have a natural fear of rejection that affects their attitude in many aspects of life, from personal relationships to financial needs and desires. In many cases, the inadequacy felt by people is emphasized by the perpetuation of false rumors. We know, in the world of relationships, what many of these rumors are and have learned to look beyond them. However, when making financial decisions, many of us are still ignorant and na├»ve regarding the way various situations affect us. For example, in purchasing a home, many people fear being rejected or disqualified for a mortgage loan approval, especially those with imperfect credit. Of course, options are even readily available for those with poor and no credit history, and these are advertised everywhere. What, though, of those who have filed for bankruptcy? If you’ve filed for Chapter 7 or Chapter 13 bankruptcy, can you still purchase a home?

Neither of these procedures should stand in the way of owning a home. While your purchase may be delayed or your credit approval may stipulate a higher than normal interest rate, you are able to buy a house. There are, however, some things to consider in a situation where you have previously filed for bankruptcy or intend to file for it and then qualify for a mortgage loan. Of course, you need the help of an expert Voted Best bankruptcy attorney in san diego to help you navigate the situation.

First of all, not all people qualify for Chapter 7 bankruptcy, and many don’t wish to. All forms of bankruptcy aim at allowing people to start over. It will wipe clean the unsecured debt and allow the credit history to begin again, as though there were never any blemishes. However, Chapter 7 and Chapter 13 are two very different approaches to this. Chapter 7 is a liquidation process. In other words, a trustee will take possession of all nonexempt assets (usually a certain amount of equity in specific properties or any item still holding a lien). These assets will be sold, with the proceeds used to pay debts as able. All other debts are removed, and in essence, you begin with a clean slate.

While this allows you to quickly begin rebuilding your credit, the Chapter 7 bankruptcy will be a tarnish that remains for years to come. After eight years, if all additions to your credit report are positive, you will be considered in good standing again by creditors, and receiving loans or decent interest rates will no longer be a problem. In the meantime, you will not be a financial pariah, but in order to get a home mortgage loan, you will either have to accept the increased interest rates charged for high risk accounts or have a cosigner.

With Chapter 13, there is a much different approach. None of your assets are seized and sold. Instead, you agree to make payments to your debt holders at reduced rates that are manageable under your income level, essentially paying off all your debts under a specified plan in three to five years. This form of bankruptcy is less condemning and, because you are actually paying off your unsecured debts, it degrades your credit rating less. While the ability to start fresh with your credit takes longer, you are able to get past the entire issue within four years, and usually able to secure mortgage loans with reasonable interest rates long before then. After all, by making the payments ON TIME, you are building your credit back in a slow fashion. In either case, the idea of purchasing a home doesn’t have to become a dream, simply because you’ve had to or will have to file for bankruptcy. Check with lending offices for their policies on working with a former filer of bankruptcy to see what limits they have and how long it will be before your slate is considered clean.