Going through the process of bankruptcy is challenging enough, not to mention to long-term ramifications, like the inability to buy a home later on. The good news is, filing bankruptcy does not limit you from purchasing property or a home in the future. In fact, as soon as a year after filing for bankruptcy you may be eligible for government loans. That being said, the typical wait time is between two and four years for conventional and government-backed loans. Regardless, if approached wisely, the journey to purchasing a home again is well within reach for individuals who have filed for bankruptcy.
First, and most importantly, when considering purchasing a home, you should bear in mind the benefit of getting a home loan after you have at least somewhat rebuilt your credit. This process will take time, so be patient. Typically, no legitimate mortgage lender out there will even speak to you about a new loan during a bankruptcy.
Ninety-nine percent of all bankruptcies are either Chapter 7 or Chapter 13. Here in San Antonio, just under half are chapter Chapter 7’s, in which the wait-time is typically five months from beginning to end. Chapter 13’s on the other hand take 3 to five years to complete, because you are “consolidating” your debts into a plan payment. So the time involved of waiting until the case is over depends on the chapter.
After you successfully finish your bankruptcy, you will receive what’s called a discharge, which releases you from the legal responsibility and liability of most debts, (with notable exceptions -- discussed elsewhere). Since your financial health in most cases is much better, getting a home loan will depend, in part, on how long it’s been since the discharge. Most conventional loans as well as and FHA or VA financing. With Chapter 13 bankruptcies, a two-year-wait for conventional loans is standard, with government loans taking even less time. However, just because you may qualify for many loan, does not mean that you should.
But think about this for a minute: Does whether or not you have good credit determine your worth as a human being? Does it have any correlation of what kind of parent or friend you are, or what kinds of things people will say about you after you’re gone from this world. Does anyone say on their death-bead: if “I only would have tried harder—maybe I could have had better credit.” So I think a much healthier relationship with credit and loans to use your credit sore as an indicator of how much money you can borrow: nothing more.If you are considering applying for bankruptcy, but unsure of how bankruptcy will affect you in future purchasing endeavors, this is not the end. While bankruptcy is something to take seriously, filing may or may not limit your prospect of buying a home in the future. If you have any questions concerning whether or not bankruptcy may be an appropriate decision for you, speak with a qualified bankruptcy attorney who will be happy to answer any concerns you may have.