The Impact of a Chapter 7 or Chapter 13 Petition on Future Creditworthiness
The pandemic has made life difficult for most Americans. You may have had a good job and been saving to buy a house, but now that job is gone, and you’re falling behind on your financial obligations. You might feel that your prospects for turning things around are uncertain at best. What is the potential impact of a bankruptcy filing on your ability to get credit in the future? Will you ever be able to get a mortgage? If so, how long will you have to wait?
Bankruptcy Won’t Ruin Your Credit Forever
Contrary to popular perception, seeking bankruptcy protection doesn’t leave a permanent stain on your credit. You can expect your credit rating to show an immediate impact after a bankruptcy filing. However, if you put together a plan and stick to it, your credit score can rebound fairly quickly for a couple of reasons:
- If you file under Chapter 7 and permanently discharge some debt, you’ll have a lower debt-to-income ratio, which will improve your score.
- If you honor all financial commitments in a timely manner, your score will start to creep up.
In addition, creditors often look at factors other than your credit score. Many consider a bankruptcy filing a positive step, a sign that you’re serious about getting your finances under control. In addition, many creditors give weight to what you’ve done lately. A consistent record of making payments on time may make you a better credit risk, even if your credit score is still a little low because of a bankruptcy filing.
The Impact of Bankruptcy on Mortgage Eligibility
For an FHA loan, you must wait at least two years after a Chapter 7 bankruptcy to qualify. If you file under Chapter 13, you may be eligible for a home loan after 12 months, provided you’ve (1) made all payments over that period in a timely manner; (2) the bankruptcy court approves the request; and (3) you can show that the reasons for the bankruptcy won’t happen again.
To qualify for a VA (Veteran’s Administration) loan, you typically must wait two years from the filing of a bankruptcy petition.
Contact an Experienced Rockwall, Texas, Bankruptcy Attorney
At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. I am currently communicating with clients by phone, text message, and videoconference. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.
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