Despite being in over their heads, many debtors are on the fence about declaring bankruptcy because they’re concerned about the impact it will have on their credit. While discharging debt will certainly cause your score to drop, the effect is not permanent. In fact, even the bankruptcy itself will eventually fall off your credit report.
If you file for chapter 7, you can expect the case to remain on your credit report for up to 10 years. If you submit a petition for chapter 13, on the other hand, the case will be reported for seven years.
Unless a bankruptcy is reported in error, you generally can’t have it removed from your credit history any sooner. That doesn’t mean, however, that lenders won’t do business with you for a whole decade.
Debtors can take steps to start rebuilding their credit as soon as they submit their bankruptcy petition. Those who are diligent about staying on top of their obligations and using borrowed funds responsibly can finance increasingly larger purchases in the years that follow. Some can even buy real estate while the case is still being reported.
How Long After Discharging Debt Through Bankruptcy Can I Buy a House?
The amount of time that must pass between when your debts are discharged and when you can apply for a mortgage depends on a variety of factors, including the type of bankruptcy you filed and the kind of loan you intend to use. Those who declared chapter 7, for example, and want to use a conventional mortgage to buy a home must typically wait two to four years after their debts are discharged. The same often applies to those who declared chapter 13.
Government-backed loans are usually more lenient when it comes to credit history. If you intend to purchase a house with an FHA loan, for example, you may qualify just one year after your debts are discharged.
To do so, those who pursued chapter 7 will have to show how the bankruptcy was the result of extenuating circumstances. They will also have to demonstrate how they have managed their money well since then.
Those who filed for chapter 13 and hope to buy a house within a year will have to stay on top of all their reorganization payments. They will also have to obtain written permission from the court overseeing their case before applying for the loan.
If you try to purchase a home fairly soon after discharging debt, be prepared to discuss the financial hurdles you faced in detail. Unless more than two years have passed, your application will be reviewed manually, and the underwriter won’t approve it unless they’re satisfied with your explanation.
Speak with a Jackson Bankruptcy Attorney
To see if bankruptcy will allow you to regain your financial footing, turn to Brown Bass & Jeter, PLLC. Our compassionate team never judges clients for the situations in which they find themselves. We’re merely committed to helping them take back control of their lives. To schedule a free, no obligation consultation with a bankruptcy lawyer in Jackson, fill out our Contact Form or call 601-487-8448.