Can You Buy A House If You Declare Bankruptcy?

Bankruptcy is designed to give consumers the chance to start over, financially speaking, which means that declaring bankruptcy does not have to signal a permanent end to your financial viability. Assuming that your bankruptcy is successfully discharged, you will be able to buy a house someday if you take the following steps.

Show Financial Responsibility

It may sound backwards, but the first step to buying a house after declaring bankruptcy is to rebuild your credit, and the best way to rebuild your credit is to get a secured credit card. Like a cross between a pre-paid card and a traditional credit card, you'll have to put down a deposit at the bank. The amount of the deposit will be equal to the credit limit on the card. A bigger deposit will get you a bigger credit limit.

Make sure the card you get reports to all three credit bureaus, because this is an important part of rebuilding your credit. Once you have a card, it's time to put charges on the card and pay down the balance on a monthly basis. 

Some banks may be willing to give you a more traditional credit card. In the first weeks and months after declaring bankruptcy, unsecured cards will come with high interest rates and some will require an annual fee. After a few months or a year, these deals will start getting better. As your credit score goes up, the credit card offers will have more attractive interest rates and little or no annual fees. Once you can get a secured card without an annual fee and with a reasonable interest rate, do so. Start putting charges on your unsecured card, and pay them down monthly. Request credit increases on an annual basis to show your bank's good faith in your ability to pay off your cards. 

Give it Time and Get Prepared

After you declare bankruptcy, there will be a seasoning period before you can get a mortgage. During this time, it's important to focus on saving money, paying your bills and making yourself look as financially responsible as you can. If you still have debts after the bankruptcy is discharged, work hard to pay them down and reduce your debt-to-income ratio. 

The amount of time you'll have to wait before getting a mortgage will depend on a variety of factors including which type of bankruptcy you declared (Chapter 13 or Chapter 7) and what type of loan you plan to apply for (FHA, private or other). If you hope to buy a home sooner rather than later, and haven't yet declared bankruptcy, work with your bankruptcy attorney and seek advice from a lender to decide which type of bankruptcy is best for your financial situation and your plans for the future.  

To learn more about chapter 7 bankruptcy, contact a company like Licata Bankruptcy


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