Can You Still Buy a Car or House After Filing Bankruptcy?
While declaring personal bankruptcy can be an effective means to get out from under crushing debt, it can devastate a person's credit rating. Bankruptcy is a red flag to lenders, who consider it a sign that the person has a high risk of not paying back a loan. This can greatly hinder the person's ability to receive a loan at reasonable terms.
Other People Are Reading
-
Features
-
Bankruptcy, which can absolve a debtor of a large number of his debts, badly damages a person's credit rating. Even if the rest of a person's credit record is clean, bankruptcy creates a large blemish. Chapter 7, defined as total bankruptcy, is generally more damaging than Chapter 13, in which the filer agrees to make limited payments to creditors. Still, according to the law offices of Jonathan B. Alper, as bankruptcies have become more common, the stigma attached to it by creditors has lessened: enough people have declared bankruptcy that creditors can no longer write them off as potential customers.
Home Loans
-
According to McDonald Law Offices, while the interest rates extended to bankruptcy filers will be steep, to reflect the lender's increased risk of lending to them, borrowers are not necessarily disqualified from securing a home loan. Criteria for lending vary by lenders, and many will emphasize the borrower's present ability to pay. The Federal Housing Administration and the Veteran's Administration are both willing to extend loan guarantees to an individual two years after his discharge from Chapter 7, so long as he can demonstrate a current ability to repay the loan.
-
Car Loans
-
According to Bankrate.com, bankruptcy filers seeking a car loan may be able to find one at reasonable rates with persistence. However, borrowers must have taken out a secured or unsecured credit card and made at least six months worth of payments on it since the bankruptcy. When calling potential lenders, a borrower should inform them of his situation and ask if they will lend to him. Only if a lender says yes should he allow the lender to run a credit check. A borrower should expect to make 30 to 50 calls to find an acceptable deal.
Timeline
-
Both Chapter 7 and Chapter 13 bankruptcies remain on a credit report for 10 years. Some credit reporting agencies, however, will strike mention of the Chapter 13 after seven years. However, while the mention of a bankruptcy disappears from your record after a decade, if you are seeking a life insurance policy or a loan valued at over $150,000, lenders are still allowed to ask if you have ever filed for bankruptcy, even after 10 years. According to BankruptcyLawInformation.com, lying in response to this question can be a form of criminal fraud.
Solution
-
In an effort to offset the bankruptcy, borrowers should strive to reestablish a good rating by paying off new loans on time and in full.
-
