There is life after filing bankruptcy! You will be able to buy a car and a house after bankruptcy. There are many misconceptions about filing bankruptcy with one of the biggest misconceptions being that no one who files bankruptcy will ever be able to purchase anything on credit after bankruptcy. This is simply not true.
In most cases, filing a bankruptcy actually paves the way for people to own a home or buy a car in the future because the bankruptcy cleans up debt problems and gives the person a clean slate and a fresh start. This allows the person to rebuild his or her credit rating after bankruptcy for a stronger financial future.
Buying a Car After Bankruptcy
If you file a Chapter 7 bankruptcy case, once you receive your bankruptcy discharge and the case is closed (typically within four to six months after filing), you can proceed to finance a car. When you apply for a loan to buy a car after bankruptcy, you may be required to pay a higher interest rate for the first couple of years after bankruptcy until you rebuild your credit rating. However, there are lenders who will approve a car loan immediately after bankruptcy. If possible, it is better to wait a year or two after bankruptcy to finance a car because your credit rating will improve and you will probably receive a lower interest rate.
The same applies when you complete a Chapter 13 bankruptcy plan (typically five years after the filing). However, if you need to buy a car during your Chapter 13 case, discuss this with your bankruptcy attorney prior to doing anything. During your Chapter 13 case, you must obtain approval from the bankruptcy court before incurring any new debt.
Buying a House After Bankruptcy
You can buy as house after bankruptcy; however, the length of time between the bankruptcy discharge and the date when you will qualify for loan approval largely depends on the type of loan you are seeking. For example, before applying for a Fannie Mae conventional loan, you must wait two years after the date of a Chapter 13 discharge and four years after the date of a Chapter 7 discharge. However, if you are applying for a loan through the Veterans Administration (VA) or a loan backed by the Federal Housing Administration (FHA), the waiting time for a Chapter 7 case is just two years and the waiting time for a Chapter 13 case is only one year.
Some bankruptcy debtors qualify for mortgages through subprime lenders (non-government backed mortgages) much sooner than they do through a lender whose mortgages are backed by the federal government. However, these loans have a greater cost in the form of higher interest rates (some as high as 15%), more fees, higher closing costs and very large down payments (i.e. 30% down payment). For most people, it is better to spend the first year or two after bankruptcy concentrating on rebuilding their credit rating and saving money for a down payment so they can qualify for a government-backed mortgage with a lower interest rate.
Contact an Experienced Mount Holly Bankruptcy Attorney
Personal Approach, Professional Service, Affordable Payment Plans
The Law Office of Travis J. Richards, LLC is a full-service Mount Holly bankruptcy law firm focused on Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, debt consolidation, credit repair, tax liens, student loans and foreclosure. We represent clients in Burlington County and throughout South Jersey.
Contact our office at 609-267-5297 to schedule your free consultation to discuss bankruptcy and non-bankruptcy alternatives. You may also use our convenient online contact form and one of our friendly, professional staff members will contact you to answer your bankruptcy questions and/or schedule a free consultation with Travis J. Richards.
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