Will filing bankruptcy affect my ability to rent an apartment or buy a house?
If you are considering buying a home there are many requirements. For instance, mortgage companies will not want to loan money to anyone who does not have some money in savings, does not have a good credit history and who does not have a steady job. But what if you have filed bankruptcy? Can you still buy a home?
Unfortunately, filing Chapter 7 or Chapter 13 bankruptcy will, for at least a time, limit your ability to borrow money and purchase a home. Filing bankruptcy not only lowers your credit score, it also remains on your credit report for up to ten years.
Applying for a mortgage after bankruptcy
Most experts suggest it will be at least two years before you should consider applying for a home mortgage. If you have filed Chapter 13 bankruptcy you may have to wait up to five years to ensure your bankruptcy has been completed.
Before you file bankruptcy you will also need to take several steps. First, you need to make sure your credit report is clean. This means you have corrected any mistakes on your credit report, paid or discharged all charges which were in arrears, and you understand all of your credit obligations.
Next, it's time to improve your credit score. If you want to increase your credit score you must pay your bills on time, but you also need to prove that lenders can trust you to repay your debts. Two ways to prove you are a good credit risk is to take out an installment loan (personal loan, car loan, student loan) and make payments on time each month. Another option is to get a secured credit card. A secured credit card will give you a credit line limited to the amount you have on deposit with the issuing bank.
Finally, it's important not to max out your credit cards and begin to save money. After the 2008 housing crash banks instituted much stricter requirements for issuing loans. Not only will your credit score have to be good to get a decent interest rate for a home mortgage, you may also be required to save more money for a down payment.
So if you want to purchase a home after bankruptcy it is possible, but you will have to take the appropriate steps. To summarize, you will need a low debt to income ratio, steady employment and a great credit history.
Renting after bankruptcy
Renting after bankruptcy is also possible, but you need to be ready to put down extra money for a deposit, potentially find a co-signor for your loan, pay all of your bills on time and find a rental house or apartment who advertises that they do not check your credit. Finally, it's important to stay at the same job if possible. Landlords like to see stability in employment.
Filing bankruptcy has long-term financial ramifications which should be discussed with a bankruptcy lawyer.
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Joint bank accounts may not be protected from garnishment.