Sometimes life throws you curveballs and you can either strike out or hit it out of the park. When it comes to bankruptcy, you do have a choice on how you respond to it and what you need to do after that happens. Here are a few tips and suggestions to get you on the right path.
Chapter 7 bankruptcy is the complete forgiveness of debt, wiping the slate clean. If you file this type of bankruptcy, this is what to expect. Your credit scores will drop dramatically and the rebuilding process will need to begin. You will need to rebuild by reestablishing your credit. The best way to start that is by getting a secured credit card through a bank. A secured credit card is depositing money in a savings account, the bank would put a hold on those funds and issue a credit card with a credit limit of the amount they have on hold. Use the card on a monthly basis and this will begin the payment history on your credit report. Make sure the bank you establish this with reports to all 3 credit bureaus or it won”t have the impact your looking for. After this has been done, you should work towards establishing a 2nd credit card and possibly a small installment loan or an auto loan. There is no need to go overboard on the credit re establishment, no need to get into more debt than needed. Keep it simple, keep it small and the scores will go back up. You have a minimum of 2 years from the discharge date of the bankruptcy before you are eligible for an FHA or VA mortgage, 3 years with a Conventional mortgage. If a home is claimed in a bankruptcy, that is a whole new ball game and many things will need to happen and would need to be further discussed to see when eligibility is available for a new mortgage, call for more details concerning foreclosed homes included in bankruptcies.
If you file a Chapter 13 bankruptcy, it’s a bit different then the above Chapter 7. This is a reorganization of debt and it’s paid out per court order in the bankruptcy documents. If you file this type of bankruptcy, than you need to wait 1 year from the filing date and receive permission from the trustee of the courts to be eligible for a new mortgage loan. You can also accomplish the same improvements to your credit scores as above because even though your repaying back the debt through the bankruptcy,, its still going to have a major negative impact on your credit score.
Filing bankruptcy is not the end of the world if you’re willing to work on getting it back to good standing. Mortgages are credit score driven these days and if you don’t have the eligible scores, you won’t get approved for the mortgage.
It’s a process but your scores will improve if you follow the simple instructions on re establishing your credit and you will be able to get a mortgage if you stick with it.
The following information comes from my friend and in house lender Kyle Crouch. His information is below if you are interested in his help. If you need help buying or selling home please feel free to contact me at 405-213-2992
Sr. Loan Officer
OK License # MLO01965
WR Starkey Mortgage, LLP NMLSR #2146
1624 Southwest 122nd Street
Oklahoma City, OK 73170