Can You Buy a House After Filing a Chapter 13 Bankruptcy Petition?
Bankruptcy Attorneys Explain If Bankruptcy Affects a Future House Purchase
Chapter 13 bankruptcy allows you to get debt relief when you make too much money or have too many assets to qualify for Chapter 7 bankruptcy, which is often referred to as a “total bankruptcy” because it completely discharges your unsecured debt. Under a Chapter 13 bankruptcy filing, the bankruptcy trustee looks at your total debts and your total income and determines your ability to pay. You would then be put on a Reno debt repayment plan that lasts three to five years.
One of the most common questions that people have when they are considering filing for bankruptcy is whether they will be able to buy a house afterward – and when. The timeline will be different for everyone, but here’s what you can expect in general:
Purchasing a House While Completing Your Repayment Plan
After you have made some payments on your Chapter 13 bankruptcy plan, you may start getting some financial relief. The more time goes on, the more confident you may be feeling, and the better your finances may be looking. You may decide that it’s time to start looking for a new home.
Unfortunately, you are unlikely to be permitted to take on a home loan when you are still under an active bankruptcy repayment plan. A bankruptcy trustee has to approve any new lines of credit, and this is unlikely to happen while you are still repaying your obligations under the plan. The primary reason for this is that any funds you may have available to buy a home would be considered available to repay creditors. If you have been able to save money for a down payment, your bankruptcy trustee would likely view that money as available for your creditors.
You may have a family member or friend who is willing to lend you the money for the down payment. This would still have to be approved by a bankruptcy trustee as it is considered a new line of credit. If the money is gifted, it could also still be seen as available for paying creditors.
Finally, even if you can get the bankruptcy trustee to approve your request to take on a home loan, you may not get a bank to approve you for a mortgage when you are in the middle of a Chapter 13 bankruptcy repayment plan. In most cases, it’s best to wait until the bankruptcy is discharged to consider shopping for a new home.
Purchasing a House after Your Bankruptcy is Discharged
Typically, traditional bank loans will be available two years after your bankruptcy has been discharged. You may be able to get approved for these loans a little more quickly, but the timeline depends entirely on your financial history following your bankruptcy discharge. You can speed up the timeline by working diligently to rebuild your credit.
The bankruptcy discharge itself can raise your credit score by reducing your debt-to-income ratio and resolving your previously delinquent accounts. However, you can strengthen your credit score by continuing to pay all your bills on time. If you take out any new lines of credit following your bankruptcy, keep the limit low, and use it sparingly. If you apply for credit and are rejected, wait a while to apply again. Excessive credit inquiries can lower your credit score.
Though it may seem like you will have to wait a long time to buy a home after filing for bankruptcy, the reality is that you will be able to buy a home much more quickly than if you did not file for bankruptcy. Continuing to struggle with debt you cannot afford will leave your credit history riddled with late payments, missed payments, high credit lines, excessive balances, and more.
Call Zero Down Bankruptcy Lawyers of Reno today to learn more about your options for debt relief through Chapter 13 bankruptcy or Chapter 7 bankruptcy. Our experienced bankruptcy lawyers will review your finances and help you understand which chapter of bankruptcy could give you the maximum debt relief while still meeting your long-term goals, such as retaining assets. Call us in Reno today to schedule a consultation and learn more. You don’t have to continue to struggle with overwhelming debt!
Zero Down Bankruptcy Lawyers Of Reno