How Soon Can I Buy a House After I File Bankruptcy?

By the book, most people can buy a house between two and four years after they file bankruptcy. These waiting periods are Fannie Mae standard waiting periods. The exact length depends on the type of loan, type of bankruptcy filing, and a few other factors. Waiting the required number of months isn’t enough. Prospective buyers must usually have at least a 580 credit score. Furthermore, they must have a ready explanation for the filing when they speak with loan officers. More on these things below.

These rather miniscule requirements shouldn’t keep a distressed debtor from partnering with a Chicago bankruptcy lawyer and filing a voluntary Chapter 7 or Chapter 13 bankruptcy petition. Chapter 7 wipes out most credit card bills and other unsecured debts in as little as six months. Chapter 13 gives debtors up to five years to pay off allowed claims, such as back taxes and past-due car payments. Both kidneys of bankruptcy give debtors the fresh financial starts they deserve.

Post-Bankruptcy Credit Scores

This area is a major concern for all former debtors, and not just those who want to buy houses. In terms of credit score, a bankruptcy filing isn’t a knockout punch, but it’s very close.

Creditors push the myth that filing bankruptcy “ruins” your credit. That’s not the case, usually because a debtor’s credit score is already very low at the time of filing, due to multiple charge-offs, repeated late payments, and other negative information. So, bankruptcy filings make poor credit scores worse.

One or two negative entries drastically lowers credit scores. By the same token, a handful of positive entries dramatically raises credit scores.

Making on-time payments may be one of the best ways to raise your score. Monthly bills, mostly auto and mortgage payments, make up about a third of a FICO score. So, come hell or high water, these payments must be made before the due dates.

Using credit responsibly may have an even more dramatic effect. We usually advise former debtors to buy some furniture or appliances on a credit plan. These individuals have less choice and pay higher interest than other buyers. But the purchase opportunities are there. Paying the bill every month boosts a credit score.

A financial reserve is important as well. A few hundred dollars is usually enough to weather another financial storm, such as a business downturn or job loss.

Filing Explanation

A complete filing explanation includes both a reason for filing bankruptcy and a good comeback story.

Reasons almost completely beyond their control usually force people to file bankruptcy. We mentioned two above. Others include a serious illness, death in the family, or divorce. Everyone, loan officers included, knows the financial strain these events cause.

Speaking of loan officers, a bankruptcy filing often looks better than repeated charge offs and late payments. People who file bankruptcy at least did something. People who don’t file bankruptcy and don’t pay their debts simply quit.

Approximately ninety days of on-time payments proves that the debtor has turned over a new leaf and is serious about meeting financial obligations.

Reach Out to a Diligent Cook County Lawyer

No matter what kind of financial problem you are having, there’s a way out. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.