Though bankruptcy offers a fresh start and escape from the burden of debt, it also has several disadvantages, including a significant and long-lasting impact on your credit score. Many debtors hesitate about filing out of fear that they won’t qualify for a loan in the future. If you are concerned that filing for bankruptcy will forever crush your dreams of homeownership, we have good news for you. Things are not as bad as you think they are.

Though it’s true that your bankruptcy will remain on your credit history for several years and it will take some time for you to be able to qualify for a loan, the truth is that when you discharge your debts you clear the way to rebuild. In most cases, people file for bankruptcy because they have fallen so far behind on their bills that there is no way for them to catch up. They are caught in an endless cycle of unpaid bills, taking every cent that they have to pay out what little they can, leaving all of their creditors unsatisfied and themselves unable to afford anything.  Filing for bankruptcy means that you will be able to stop giving all of your money to your creditors, so you can start to save up for a down payment on a house.

Beyond building up your savings, there are several things that you can do after bankruptcy to hasten your ability to qualify for a mortgage. First, keep in mind that though a Chapter 7 bankruptcy will stay on your credit report for up to ten years (and seven years for a Chapter 13 bankruptcy), keeping up with post-bankruptcy bills will help you to rebuild your credit score and counteract the bankruptcy’s impact. There are also special types of loans available to people who don’t have a lot of money for a down payment. Applying for a Federal Housing Administration loan offered through the Department of Housing and Urban Development is possible just two years after your Chapter 7 discharge as long as you can show that during those two years you’ve kept up with your bills, and if you filed under Chapter 13 you only have to wait one year.

You can also apply for a VA loan if you are a veteran. These also require a two-year waiting period after a Chapter 7 discharge but have the advantage of not requiring a down payment. And conventional loans are also available to those who have rebuilt their credit after four years for Chapter 7 filers and after two years for Chapter 13 filers.

For more information about how filing for bankruptcy will impact your future plans, contact our bankruptcy attorneys today.