Some people worry that, if they file bankruptcy, they won’t be able to someday obtain a mortgage. They worry that this will permanently remain on their credit report and scare away lenders. The good news is that a person can, in fact, be eligible for a mortgage after filing bankruptcy in as little as two years. If you worry that working with a Chapter 7 bankruptcy lawyer will permanently ruin your credit and prevent you from ever owning a home, this fear is unfounded.
One of the most popular types of loans, especially for first-time buyers, is an FHA loan. These loans require a low down payment (as low as 3.5%) and are backed by the federal government. A person is eligible to apply for this type of loan two years from the date of their debt discharge. Obtaining the loan will still require traditional lending standards, such as reliable monthly income, responsible borrowing, etc. But after two years, a person will be free to apply if they feel they meet these standards.
It may sound surprising, but bankruptcy might be able to actually HELP a person obtain a mortgage. Obviously, in the short term, it will severely impact a person’s credit. But in most cases, people in severe debt already have poor credit, so the practical impact is negligible. But when a person suddenly finds they don’t have to throw money at unsustainable debt, they have extra money to save for a down payment and meet their other obligations. This gives a debtor the opportunity to prove they are responsible. Far from being a death knell for a mortgage, Chapter 7 might actually be the first step towards getting your debt situation permanently under control.
At Westbrook Law Group, we have helped many clients across St. Louis and Lincoln County obtain the help they need. We know how stressful it can be to have unsustainable debt loads and we work to end this stress. If you have questions about how bankruptcy might be able to help with your situation, contact our office right away for a free consultation.