The Effects Of Bankruptcy
A large number of individuals who are deep in numerous debts see bankruptcy as a simple way of ridding various debts and a simple "fresh start". While there may be times and conditions in which bankruptcy is actually the preferred method, it's not a decision to make hastily until you consider all of the consequences.While you might have sworn off those department store and other high interest credit cards for good, chances are pretty good there could still be circumstances in which you'll need or want credit. Whether it is leasing or buying a car, buying a house, renting; all of these situations require decent credit, and there are few things that look worse on your credit reports than a bankruptcy.
Whenever a loan company is deciding whether they should provide credit to a person, they will mainly assess the ability of the customer to make ongoing payments based on 3 things; their recent debt-to-income ratio, financial stability, and their history of payments. With a bankruptcy on your credit reports, your financial stability and history are not going to look good to anybody.
Your credit reports can record info on your bankruptcy for as many as ten years after filing or discharge. While it's certainly possible to find credit following a Chapter 7 or 13, knowing your credit report is what your ability to acquire credit is based off, it would be particularly hard if not impossible in many situations. If you do start to establish your credit again, you will end-up paying higher than ordinary interest rates on just about everything including credit cards and mortgages.
Buying a home after claiming bankruptcy
While it is not impossible to take out a home loan after having filed for bankruptcy, it is far more difficult. Most consumer lenders will put the applicant
under substantial scrutiny unless the bankruptcy is from a long time ago and credit has been terrific since. Even then, it is difficult to get rates as
competitive as someone with the same credit score and a spotless financial past.
FHA mortgage loans normally require the applicant has established at a minimum two other credit accounts from the time of the bankruptcy, that should be kept in proper standing. The person borrowing should also wait for a period of at a minimum two years after filing and discharge for Chapter 7's or at least one year following Chapter 13's.
VA financing options generally need a 2 year period of solid credit after filing and discharge also, though special circumstances might be considered.
