Mortgages After Bankruptcy in New York

Nyack Bankruptcy Attorney

Credit card debt. Bills piling up. Filing for bankruptcy. Bankruptcy proceedings. Destroyed credit. Foreclosure. All of these things can take a toll on a person, not just financially, but emotionally and legally. Though some might view bankruptcy as an admission of failure, bankruptcy is actually an opportunity. Bankruptcy provides a way for a previously indebted individual to start anew. He or she is forgiven of debts and given a chance to work toward a more financially-sound future. Many people who file for bankruptcy give up on the hope of being able to make investments, save money, or ever own a home, but this should not be the case. Despite the burden of having a bankruptcy reported on your credit, you may still be able to grow a business or even take out a mortgage and own a home.

The Real Effect of Bankruptcy

One factor in determining your eligibility for a mortgage after declaring bankruptcy depends on which type of bankruptcy filing you opted or were eligible for. Chapter 7 and Chapter 13 bankruptcies are the two most common among individuals and both typically involve at least partial forgiveness of outstanding, unpaid debts.

Chapter 7

Chapter 7 bankruptcies result in a complete discharge of most of the debtor’s debt and may be more damaging to a person’s credit. According to the standards set forth by industry leader Fannie Mae, a borrower must wait four years from the date of discharge or dismissal of bankruptcy before applying for a mortgage. The discharge date is when the debts are essentially wiped out by the creditors, and dismissal occurs if the case has been discharged by the court and is no longer going through to the end. The waiting period may be lowered to two years in certain extenuating circumstances, although this is uncommon.

Chapter 13

A person that filed for a Chapter 13 bankruptcy sets up a payment plan with the courts to pay back some or most of his or her debt. This is generally less damaging to a credit score, and usually makes buying a home an option sooner than if the individual filed for Chapter 7 bankruptcy. The loan waiting period for Chapter 13 actions is either two years from the discharge date or four years from the dismissal date. Discharge in a Chapter 13 bankruptcy usually occurs when the debts have been satisfied, but dismissal may occur if the debtor fails to make timely payments under the court-approved plan. Chapter 13 bankruptcies tend to be more favorable, but require strict adherence to the court-ordered payment plans and conditions, which may include credit counseling.

Mortgage Options After Bankruptcy

Regardless of whether you filed a Chapter 7 or Chapter 13 bankruptcy, you may have a chance to become eligible for a home loan sooner than the Fannie Mae guidelines provide for conventional loans. A “conventional” loan is a loan from a bank or private entity and one that is not insured or backed by the government. Consequently, a Federal Housing Administration (FHA) loan in insured by the federal government, which essentially means that there are increased protections regarding a borrower’s failure to pay in the future.

One type of loan is not necessarily more favorable than the other, but those that have declared bankruptcy often can get a loan under FHA sooner after debt discharge or dismissal than they could if they wanted to obtain a conventional loan.

Tips for Rebuilding Your Credit

If you filed for a Chapter 13 bankruptcy, the very best thing to do is to get your debts discharged as soon as possible. This requires strict adherence to the payment plan you agreed to in the bankruptcy court, and fulfilling any other duties you agreed to in exchange for forgiveness and flexibility in payment. Another thing to consider is just because the rules say that you can apply for a loan after bankruptcy, that doesn’t always mean it’s a smart move financially to apply. Remember that all credit inquiries may take a toll on your credit score, and when you are trying to rebuild your credit, avoiding inquiries is one simple thing you can do to help boost your score, or at least not lower it. Other considerations include:

  • Participating in credit counseling, even if it is not required by the terms of your bankruptcy order with the court;
  • Avoiding credit inquiries when possible;
  • If you still have a credit card, never charging more than you could pay off at the end of the month;
  • Paying off your entire balance each month;
  • Setting up automatic payments so that you do not accidently forget to make a timely payment;
  • Creating a budget. This seemingly small tip can really help you realize where your money is going each day and can help you see how to better allocate your funds; and
  • Starting to saving – not for anything in particular, but even if you can only afford to put $10 in a savings account each week, you will see the number rise greatly and be there for you if you need it.

Debt Relief Solution Attorneys

Filing for bankruptcy does not automatically bar you from any hope of ever being a homeowner. If you follow the terms of the court orders, work to re-establish your credit, and borrow responsibly, you can become a homeowner in the future. Remember also that getting approved for a home mortgage is difficult for all types of buyers, whether they have a bankruptcy on their credit or not. Your bankruptcy will be a part of your credit report for up to 10 years, but does not need to prevent you from investing in your future. Bankruptcy cases rose nine percent in 2010 and it is estimated that one in eight Americans have considered bankruptcy as a solution—so you are not alone.

Contact An Experienced Nyack Bankruptcy Attorney

If you are facing a bankruptcy Nyack bankruptcy attorney Robert S. Lewis knows how to work toward rebuilding your credit and getting your debts discharged. The Law Offices of Robert S. Lewis, P.C. can advise you on the best approach for your unique situation and will help you understand your legal rights, obligations, and responsibilities. We know how to navigate the bankruptcy system to ensure the most favorable outcome for our clients that will help their debts be forgiven, but allow them to hold onto a successful future. Do not hesitate to contact our office today by calling 845-358-7100 or submit an online contact form.