Many people are unaware of how a personal bankruptcy can help them to confront and resolve their financial problems. This may be why some people that are buried in debt seem to procrastinate before filing for a personal bankruptcy, even though they know they have little chance of repaying their outstanding debt. Some Texas consumers may even worry that bankruptcy may prevent them from obtaining a mortgage or refinancing their current home. However, there are many actions consumers can take to address this issue by rebuilding their credit rating.
Although a bankruptcy will usually remain on a credit report for seven to 10 years, consumers may be able to obtain a mortgage in as little as one year, though it may take some hard work. Federal Housing Administration mortgages are permissible one year after a Chapter 13 bankruptcy and two years after a Chapter 7 bankruptcy. Generally, consumers will need to wait two to four years to obtain mortgage loans from Fannie Mae and Freddie Mac, and in all instances the focus should be on rebuilding one's credit profile.
Reestablishing credit will help demonstrate financial responsibility. Some common methods of doing this are paying rent and utility bills in a timely manner. A secured credit can also help because the payments are reported to a credit bureau. Also, if a bankruptcy was a result of a particular incident, such as a death of a spouse, divorce, or medical emergency, the waiting period may be reduced. However, most lenders will want consumers to explain the situation in a letter along with related documentation.
There are still many options to obtain a mortgage loan after filing a personal bankruptcy in Texas. In order to ensure one is able to discharge or reorganize debts in bankruptcy, one should make sure to fill out the required paperwork correctly. The type of bankruptcy chosen is an important consideration, since each type has its own advantages and disadvantages. It may be necessary to consult a legal professional for advice and assistance.
Source: New York Times, "Life After Bankruptcy," Vickie Elmer, Sept. 13, 2012