Gregory Starkey, Attorney at Law


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Is getting a mortgage post-bankruptcy possible?

Generally the public may perceive the ability to get a mortgage post a bankruptcy as impossible or extremely difficult, at least for the period that the bankruptcy shows up on a credit report. However, in Alabama and across the U.S., under both Chapter 7 bankruptcy and Chapter 13 bankruptcy, it is possible to be eligible to apply for a home loan in as little as a year following the bankruptcy proceeding. This truly allows individuals the fresh financial start that they need.

Financial challenges, which in turn often lead to a need for debt relief, play a role in an individual's decision to file for Chapter 7 or Chapter 13 bankruptcy. Those who file for chapter 7 bankruptcy may be able to have all of their debt discharged. After two years, one can become eligible to apply for a government-insured loan; and after four years, one can apply for a conventional mortgage loan. Chapter 13 bankruptcy may allow an individual to apply for a government-insured loan in one year and conventional financing options in two years.

However, under both of these options, the applicant's credit report will be scrutinized in order to ensure his or her bills are being paid on time. Not acquiring a lot of new debt and paying all debt on time will aid those facing bankruptcy in their quest to obtain a mortgage loan. Experts suggest that individuals who have filed for bankruptcy do four things to have a better chance of receiving the mortgage loan. Those tips include: getting a credit card to improve one's credit, saving 10 percent of each paycheck, opening a checking and saving account to show financial responsibility if an overdraft occurs and paying rent and utility bills on time consistently.

Bankruptcy, which is and should be a fresh financial start for individuals, can allow Alabama residents to acquire mortgage financing in as little as a year following the bankruptcy. This will allow families to get back on their feet, which in turn can have a positive effect on the economy as a whole.

Source: NASDAQ, "How to get a mortgage post-bankruptcy," Michele Lerner, Oct. 10, 2012

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