A Positive Outlook on Obtaining a Mortgage after Bankruptcy

The article Mortgages – Life After Bankruptcy, published in the New York Times on September 13th, sheds light on the not-so-grim reality of getting a mortgage after filing bankruptcy:

“Every month tens of thousands of people file for federal bankruptcy protection, mostly to wipe out debts and start anew.  Many of these filers mistakenly think that it will be many years before they can obtain a mortgage or refinance an existing home loan, if they ever can — perhaps because notice of a bankruptcy filing typically stays on a credit report for 7 to 10 years. In reality, they could become eligible in as little as one year, as long as they work diligently to improve their financial picture.  Mortgages guaranteed by the Federal Housing Administration are permitted one year after a consumer exits a Chapter 13 bankruptcy reorganization…”

Bearing in mind that a bankruptcy stays on their credit reports for 10 years, many debtors do not realize that they can begin building a positive credit history immediately after they file.  Many lenders are willing to consider a debtor’s particular situation, such as the circumstances that caused them to file bankruptcy in the first place.  In the case of Chapter 13 reorganizations, lenders may see successful completion of a case as a sign of financially responsibility on the part of the debtor.  Clients often ask us if filing for bankruptcy will harm their credit.  Most people who come see us have already suffered significant damage to their credit histories so, while bankruptcy is another negative mark, it can also be a first step toward repairing bad credit and obtaining a mortgage in the future.

Check out the full article to hear what the New York Times has to say about obtaining a mortgage after filing bankruptcy. Everyone's situation, of course, can vary so please contact us to learn if filing for bankruptcy is right for you.

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