Bankruptcy is a legal process that can be used to resolve overwhelming debt, and every year, 800,000 people in the United States use it to get out of debt. Michigan residents that have gone through a bankruptcy may think that buying a new home may be impossible. Although it may be a complicated process, purchasing a home after a bankruptcy is possible.
The type of bankruptcy a person that wants to buy a new home files is an important factor. Chapter 7 releases debtors from the obligations for their unsecured debt. Chapter 13 filers are able to reorganize their debt and pay it back in affordable monthly payments. Mortgage lenders tend to be more accommodating to Chapter 13 filers than Chapter 7 ones because the former are paying back their debts.
Lenders have varying requirements for how much time has to pass before considering applications from bankruptcy filers. Most bankruptcy filers will not be able to have a lender review their application until two years after the bankruptcy. Depending on the loan applicant and type of loan, the waiting period could be as long as four years.
Once an individual’s bankruptcy has been discharged, it is important that he or she reestablish his or her credit. Lenders will look down on any delinquencies in a credit report after bankruptcy.
It is not necessary for someone to obtain a large number of accounts in order to build new credit. Individuals should obtain just a few credit lines and make sure to make payments on time during the next year to improve their credit score.
An attorney that practices bankruptcy law may advise his or her clients about what type of bankruptcy may be suitable for their financial situation and how it may eliminate their debt. If a client has a steady stream of income, Chapter 13 may be suggested to pay back debts via affordable monthly payments.