Bankruptcy, Foreclosure, Buying a Home
Many Americans who have endured bankruptcy or foreclosure may fear that they will never own a home again. Nothing could be further from the truth, but there are things to know.
Bankruptcy Helps, Hurts
Even though some people have been smart enough to file for bankruptcy when financial aspects of their lives were spinning out of control, they are not quite aware what the aftermath of such a decision might involve. Will they ever be able to borrow again? Perhaps they never owned a home but were forced into bankruptcy. Will the dream of home ownership be denied them forever?
The answer to these questions can be partially answered by looking at the type of bankruptcy relief sought. Chapter 7 bankruptcies absolutely discharges debt, but most personal assets are lost, sold. Chapter 13 is a method of paying off debts, thus forestalling foreclosures or loss of vehicles, etc. Chapter 13 is least harmful to a credit rating. Whichever method chosen, a heavy blemish is put on a credit rating when it comes to courting lenders for home, auto, credit cards, and other types of loans. But, that does not mean that borrowing or owning a home is forbidden to them forever.
Recently, many foreclosures have befallen homeowners who were allowed to draw subprime mortgages. When the housing bubble burst, they were left with loans costing more than the worth of the house. Coupled with other recessionary financial problems, such as job loss, they found themselves in over their financial limits. Many of these folks were not savvy enough to use the various avenues to forestall foreclosure and wound up losing their homes. Steps should be taken immediately when a homeowner sees trouble. Sometimes legal measures with the help of a lawyer can help stall the process until the homeowner can refinance or gain other assistance.
Buying and Bad Credit
Just because someone has filed for bankruptcy protection or endured a foreclosure process, does not mean that the following bad credit rating will keep them from buying again. Interest rates will be higher and the process more complicated, but it can be done. If lenders were unwilling to oblige any person with a blemished credit report, they would be making few loans. After bankruptcy or foreclosure, if a person takes steps to improve their credit score, such as availing themselves of a secured credit card or obligating themselves to smaller loans such as for a vehicle, and making timely payments, they will have a better chance of lenders taking kindly to them.
True, a bankruptcy can remain on your credit report for up to ten years. (You must wait seven before attempting to file for bankruptcy again.) But you need not wait until that time has lapsed before attempting to buy or borrow. If you do wait awhile, you will have time to start improving your scores as mentioned above and thus get yourself a more favorable loan with lower rates and better terms. So, no, your financial life is not ruined forever. You may not get as good a loan as in the past, but lenders still do attempt to accommodate those with less than perfect credit histories.
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ABOUT THE AUTHOR
Lara Sawyer is the author of this article. She works successfully as a financial advisor with years of expertise on Guaranteed Bad Credit Loans. She publishes informative articles about Money Lenders for Bad Credit, home loans, credit cards, auto loans, business loans and others at http://www.fastguaranteedloans.com