February 27, 2013
/24-7PressRelease/ -- Help to get a mortgage after bankruptcy
Article provided by Law Office of Andrew Kern
Visit us at http://www.kernlawoffice.com/
After declaring bankruptcy, Sonoma-area Californians may feel like they will not be able to get a home mortgage or even refinance an existing home mortgage loan. This, however, is not always true. Life after bankruptcy does not mean a life without becoming a homeowner or ever getting credit again. A bankruptcy filing stays on a person's credit report for about seven to ten years, but if a filer is judicious with his or her credit after bankruptcy, he or she can be eligible for a mortgage loan in as little as one year.
Types of bankruptcy
Individuals can file for either Chapter 13 bankruptcy or Chapter 7 bankruptcy. Chapter 13 bankruptcy allows debtors to enter into a repayment plan. On this plan their debts will likely be reduced, sometimes, substantially, and they will work with the court to find a repayment plan that works for them. The Federal Housing Administration insures private loans allowing borrowers with poor credit scores to obtain home loans. After this type of bankruptcy a borrower may be eligible for an FHA loan in as little as one year.
Chapter 7 bankruptcy is more common and it allows debtors to have some or all of their debts discharged. Borrowers may be eligible for FHA loans after this type of bankruptcy in two years. Some experts say lenders are less likely to want to extend credit to borrowers after a Chapter 7 bankruptcy than a Chapter 13.
Rebuilding credit
Bankruptcy greatly affects a person's credit score, but one's credit score is not the only factor that goes into an approval for a mortgage loan. This is particularly true when the bankruptcy filing occurred because of a major life event that will not repeat itself such as illness, divorce or death of a spouse. To demonstrate the life event to a potential lender, the borrower will need to write a hardship letter and provide evidence to back up the letter.
People can also become more likely to be approved for a mortgage loan if they can demonstrate financial responsibility by rebuilding their credit. To rebuild credit, a individual who has completed bankruptcy should make sure all bills are paid on time and in full. Also, an individual who has completed bankruptcy can benefit from having a credit card in his or her name. The minimum credit card balance should be paid on time and each month the holder of the card should pay off the entire balance. The conservative use of the credit card will help prove financial responsibility and improve the individual's credit score. As an individual repairs his or her credit, the more recent use of finances will begin to overshadow the bankruptcy filing, and a home loan will once again be in reach.
Those having trouble with their finances and considering bankruptcy or those who are having financial trouble after bankruptcy should consider contacting a bankruptcy lawyer to address their monetary issues and explore their legal options. It's important to remember that bankruptcy is a form of debt relief. Bankruptcy should not be seen as a failure, but one of many tools to offer a fresh start when a person or family is struggling with financial issues.
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