Is it possible to get A conventional loan after bankruptcy? Yes. Despite what you may have heard your dream of home ownership does not end when you file for bankruptcy. The challenge will be to obtain a post-bankruptcy loan without terms and conditions that are overly costly and burdensome. Doing so will take some effort on your part. One of the first things you should do after your bankruptcy has been discharged is to apply for credit (credit card, personal loan, etc.) You need to re-establish credit to build a credit profile free of derogatory credit. This doesn’t mean that you should apply for every credit card offer you receive in the mail or every department store where you’ve shopped. Multiple inquiries will have a detrimental effect on both your credit score and credit profile. Apply for one card; wait for the result and repeat….within reason.
How To Get a Mortgage After Chapter 7 Discharge
Bankruptcy In America—The Facts Bankruptcy is a legal means by which individuals overwhelmed by debt can get a fresh start. It can help you rid yourself of debt entirely through a discharge or restructure your debt into a repayment schedule that is manageable with your income. Filing for bankruptcy is not a sign of failure. Bankruptcy is a tool to be used by those that through no fault of their own, are struggling to keep up with their monthly obligations. In 2016, a just under one million bankruptcies were filed. Over 60% of those bankruptcy petitioners filed due to medical expenses. The top 5 reasons for filing are:
The reality of bankruptcy in America has led to a shift in the perception by the public and financial institutions regarding how and why people are cast into financial hardship. As a result, a variety of non-conventional, private lenders have emerged over the years that are willing to extend loans after bankruptcy to people that meet their guidelines. A recent study by the Federal Reserve found that 90% of individuals that have filed for bankruptcy have access to some form of credit within a year and a half of their bankruptcy discharge and that 75% are offered unsecured credit.
How To Improve Your Credit Score To Obtain a Conventional Loan After Bankruptcy Chapter 13 or 7
If you have filed for bankruptcy and are looking for ways to get back in the credit game, there is hope. But you must plan carefully and understand your situation fully before you make a start. Chapter 13 Or Chapter 7? The One You Choose Matters If you have not filed for bankruptcy yet, it is important to consider your options carefully. Chapter 13 is essentially a debt repayment adjustment plan for regular income earners. It allows you to restructure your debt so that you can re-pay your creditors over an extended period of time—usually 3 to 5 years. The discharge date is the date you have to count your years from. When you file Chapter 13, you get to keep your assets.
You will save your house from foreclosure and keep other high-value items you hold dear. Although a Chapter 13 bankruptcy will show up on your credit report for 7 years after you file, there tends to be a shorter “recovery period” than with a Chapter 7.
Differences Between Chapter 7 and Chapter 13 When Applying For a Mortgage
You are also allowed to apply for a new mortgage while still in Chapter 13 as long as you have made at least 12 payments and those payments have been on time. The other option is to file for Chapter 7. The Chapter 7 involves the liquidation of your assets and the distribution of the proceeds to your creditors. There is no repayment plan with a Chapter 7. Instead an administrator or trustee is assigned, and they are charged with gathering your non-exempt property and selling it off to pay down or off your debt. Depending on the extent of your debt and the will of your creditors, liens can be put on future income and property to pay off what you owe if the selling of your property does not cover it. A Chapter 7 bankruptcy remains on your credit report for a decade. With each passing year, however, your credit score will slowly begin to climb, especially if you are able to prove your ability to pay back loans. Getting Back On Your Feet— Securing credit and paying timely after bankruptcy can help you get your financial life back. You must start somewhere. And the best way to do this is to find a creditor that specializes in helping people whom have had a life-changing event including a bankruptcy, foreclosure, short-sale, deed in lieu, etc. Keep in mind that such companies are “for profit.” They will not simply give you a loan out of compassion. There will always be risk vs. reward. You will subject to higher rates and costs compared to those individuals that have not filed. Your application will be heavily scrutinized as well.
Letter of Explanation After Chapter 13 To Obtain a Mortgage
There is a way to get conventional loans after bankruptcy. People who are thinking about a mortgage loans after chapter 7 have to start working on their credit score. In preparation for starting your new credit life, be prepared to document, in great detail, the events which led to your filing. You must also be prepared to explain how you ended up in bankruptcy, how you are trying to turn your life around, and why you are no longer a financial risk. The sudden and unexpected loss of a job, a medical emergency, the death of a loved one—these are some of the reasons that such financial institutions are willing to accept. Sowing that your life-changing event will not happen again along with a willingness and ability to repay, is key to re-establishing credit