Buying a Home After Bankruptcy

Chapter 7 Vs. Chapter 13

Many people have a natural fear of rejection that affects their attitude in many aspects of life, from personal relationships to financial needs and desires. In many cases, the inadequacy felt by people is emphasized by the perpetuation of false rumors. We know, in the world of relationships, what many of these rumors are and have learned to look beyond them. However, when making financial decisions, many of us are still ignorant and naïve regarding the way various situations affect us. For example, in purchasing a home, many people fear being rejected or disqualified for a mortgage loan approval, especially those with imperfect credit. Of course, options are even readily available for those with poor and no credit history, and these are advertised everywhere. What, though, of those who have filed for bankruptcy? If you’ve filed for Chapter 7 or Chapter 13 bankruptcy, can you still purchase a home?

Neither of these procedures should stand in the way of owning a home. While your purchase may be delayed or your credit approval may stipulate a higher than normal interest rate, you are able to buy a house. There are, however, some things to consider in a situation where you have previously filed for bankruptcy or intend to file for it and then qualify for a mortgage loan.

First of all, not all people qualify for Chapter 7 bankruptcy, and many don’t wish to. All forms of bankruptcy aim at allowing people to start over. It will wipe clean the unsecured debt and allow the credit history to begin again, as though there were never any blemishes. However, Chapter 7 and Chapter 13 are two very different approaches to this. Chapter 7 is a liquidation process. In other words, a trustee will take possession of all nonexempt assets (usually a certain amount of equity in specific properties or any item still holding a lien). These assets will be sold, with the proceeds used to pay debts as able. All other debts are removed, and in essence, you begin with a clean slate.