Credit After Bankruptcy

Debtors often worry about being able to get credit after bankruptcy. However, in a year or two after bankruptcy the debtor may be able to get a home mortgage loan. The FHA loan guarantees allow debtors to qualify for mortgage loans within two years if the debtor incurs good credit after bankruptcy. Debtor may also qualify for the FHA loan within one year after chapter 7 bankruptcy if he can show that special circumstances that were outside his control caused the bankruptcy and that such circumstances are unlikely to reoccur. Furthermore, one year after the chapter 13 discharge, the debtor can qualify for the FHA loan guarantee.

Discharge from the old loans will improve the debtor’s ability to make payments, making creditors more willing to give out a loan to the debtor, whom no longer has large obligations to other lenders. Credit history prior to the bankruptcy is also a factor that the lenders look into, which might show debtor’s habit of paying his bills on time. Having a good credit history before filling for bankruptcy may make it easier for the debtor to improve his credit history after bankruptcy.

In conclusion, sometime the bankruptcy may make it easier for the debtors to buy a house within a year after discharge, rather than fighting the old debts without filling for bankruptcy. After all, without the bankruptcy the debtor might have a ton of debt, making the home mortgage lender suspicious of the debtor’s ability to pay for the new mortgage. Although, filing a bankruptcy, discharging old debt, and keeping good credit after bankruptcy might qualify the debtor for the FHA mortgage loan within year after bankruptcy discharge, allowing him to buy a home.

For more information about credit after bankruptcy, visit my credit help blog.