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Getting a mortgage after Chapter 7 bankruptcy

The dream of owning a home is still among the top priorities for many Florida residents. This is true even in cases that have been defined by serious financial hardship in recent years. Many individuals who are considering filing for Chapter 7 bankruptcy worry that their ability to ever own a home of their own will be challenged by having sought bankruptcy protection. This, however, is not true and is one of the leading misconceptions about the bankruptcy process.

Once a Chapter 7 bankruptcy has been discharged, filers will need to wait a minimum of two years before obtaining a mortgage. This may seem like a long time, but it is important to gain the proper perspective when weighing one's options. If an individual chooses to try and pay down their existing debt without filing for bankruptcy, is it likely that this process can be completed within two years? If not, Chapter 7 bankruptcy can offer a faster path to home ownership through the elimination of many forms of consumer debt.

Once the two-year waiting period has ended, prospective borrowers will need to demonstrate to lenders that they have established a positive credit history since the bankruptcy was discharged. Having a steady income is also a positive factor and can make it easier to get a good mortgage package. Many lenders will also be willing to factor in the reasons behind the decision to file, such as medical debt or a sudden job loss.

It is important for Florida residents to understand that filing for Chapter 7 bankruptcy does not render a fatal blow to one's ability to purchase a home in the years to come. In fact, the elimination of consumer debt obtained through bankruptcy discharge can give individuals the freedom to rebuild their credit and save for a downpayment on a new home. Many people find that they are in far better credit standing in the years following personal bankruptcy than they were in those leading up to the decision to file.

Source: credit.com, "How to Get a Mortgage When You've Been Through Financial Hell", Scott Sheldon, April 30, 2014

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James H. Monroe, P.A.
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Orlando, FL 32804

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