When can I buy a house after filing for bankruptcy?

How Soon Can I Buy?

You can typically buy a house two years after the filing of a Chapter 7 bankruptcy.  Lenders want to see that you have rehabilitated yourself after a bankruptcy filing.  They want to see that you have not incurred any negative credit since the time of filing.  They want to see that you have the ability to pay on a mortgage and that you have the ability to make a down payment on a house.

Old Debts Will Be Forgotten

If you qualify for a mortgage and you are able to buy that house, then the debts that were discharged in your bankruptcy are no longer going to bother you.  The trustee has no right to come back to years later and seek to take your property.  You have gotten a fresh start under Chapter 7.  You have eliminated all of your dischargeable debt and you have now rehabilitated yourself to the point where you have saved enough and your credit has improved to the point where you can qualify for a decent mortgage.

 What Is A Decent Mortgage?

Now, I say a decent mortgage because the interest rate after two years is not going to be the same interest rate as someone who never filed for bankruptcy and had perfect credit.  However, the interest rate will be decent enough that you will be able to get back on your feet and be able to afford a monthly payment on a house that’s reasonable.  The longer you stay in good standing with your mortgage company and with a positive credit report, you will have the ability to refinance beyond the two-year period to get even a lower rate.

 Best Advice After Filing

So I will tell my clients this: save up after your bankruptcy for a down payment on a house.  Maintain good credit and look for a house that you can afford that has an affordable monthly payment.  If you can do those items, you are going to be a homeowner two years after your bankruptcy case is filed.

 If You Wish To Keep Your Existing Home After Filing

For those of you that are filing and wish to keep your existing home, please be aware that you do not have to reaffirm the debt in order to maintain ownership.  The bankruptcy code is clear that primary real estate is not a debt that must be reaffirmed.  Unlike other secured debts such as vehicles that must either be reaffirmed, redeemed or surrendered, homes are treated differently under the code.  In some cases, clients have complained that the mortgage company would not attempt loss mitigation efforts simply because the debt was not reaffirmed.  This is simply a false statement indicating the mortgage company’s reluctance to engage in true, loss mitigation efforts.  It is shocking to many clients to learn that the mortgage company is demanding a reaffirmation agreement despite the fact that the case is long discharged and that the agreement is not required under the bankruptcy code.

For more information regarding homes during and after a bankruptcy case, contact an experienced bankruptcy attorney for advice.  Remember, each case is different.  What may have been the case for a friend or neighbor may not be the case for you.



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