Buying A House After A Bankruptcy Filing? What You Should Know

Large mortgage lenders have set some post-filing waiting periods, and most smaller lenders follow these rules. The waiting period varies, mostly depending on the facts of the case and the circumstances which caused your filing (more on that below). Usually, however, it’s between one and four years, whether you file Chapter 7 or Chapter 13. The waiting period clock starts ticking on the filing date, and not the discharge date. So, especially if you file Chapter 13, there’s a very good chance you’ll be eligible for a mortgage loan before court supervision ends.

A Chicago bankruptcy attorney is a very important part of this process. An attorney gives you solid advice as to which chapter to file, based not only on your current financial situation, but also based on your future financial plans. Then, after the filing, and even after the discharge, we help families recover quickly, from an economic standpoint.

Benefits of Bankruptcy

As mentioned, the circumstances of your filing could reduce the official waiting period. Most people file bankruptcy because of divorce, job loss, serious illness, or other such circumstances which are mostly, or entirely, beyond their control.

Once you file bankruptcy, the benefits are substantial. For example, the Automatic Stay halts most kinds of creditor adverse actions, including:

• Foreclosure,
• Collection lawsuits,
• Repossession,
• Wage garnishment, and
• Eviction.

In Chapter 13, Section 362 of the Bankruptcy Code remains in effect for up to five years. During this time, debtors make income-based payments which erase past-due mortgage payments and other secured debt delinquency.

Chapter 7, on the other hand, quickly eliminates medical bills, credit cards, and most other unsecured debts. Some unsecured obligations, such as back taxes and student loans, are only dischargeable in some situations.

Finding a Home

Whether or not your bankruptcy is still active, the early part of the process is much the same. Potential buyers must locate a home and secure financing.

Because of the recent bankruptcy filing, your shopping selection might be limited. However, it’s illegal to discriminate against anyone because they file bankruptcy. So, these shoppers can look at any property. Securing financing for it might be an issue, even if the official waiting period has expired.

Actually, many former bankruptcy debtors are surprised by how easy it is to obtain a mortgage loan. Since these pans are high-risk loans and lenders can charge higher interest rates, many bankers prefer to work with individuals who have damaged credit.

A Chicago bankruptcy lawyer cannot lend money, but an attorney can connect current and former bankruptcy debtors with lenders who work with damaged credit buyers. This connection makes the process much less stressful and time-consuming.

Buying a House During Bankruptcy

Many mortgage companies lift the mortgage ban after a debtor makes twelve consecutive on-time debt consolidation repayments. Furthermore, not every home purchase requires a mortgage loan, especially if you are buying an investment property.

So, there’s a good chance you might want or need to buy a home before the judge discharges the bankruptcy. That’s possible in most cases, but the process is a bit more complex.

Because of the ongoing court supervision, the judge must approve the sale. Before that happens, the trustee (person who oversees the bankruptcy for the judge) will want to see all the financial details, especially the down payment and monthly payments. The trustee will also want to know how the debtor is making the down payment, and will want assurances that the monthly house payment won’t compromise the debtor’s ability to make Chapter 13 payments.

If the trustee agrees and no creditors object, many judges approve motions to incur additional debt without holding a hearing.

Work with Experienced Cook County Lawyers

You can buy a house after bankruptcy, and even during bankruptcy, in most cases. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

incharge.org/bankruptcy/how-soon-can-i-get-a-mortgage-after-bankruptcy/