Rules vary among different lenders. Government-backed loans, like VA loans, usually have shorter waiting periods. Generally, you must wait between two and four years after Chapter 7 Bankruptcy and one and four years after a Chapter 13 Bankruptcy. That’s an average of about two years. Typically, bankruptcy remains on your credit report for either ten years (Chapter 7) or seven years (Chapter 13).

The aforementioned two-year waiting period is a minimum period. At that point, a lender’s “no” turns into a “maybe.” Creditors still want to see that the debtor has made substantial rehabilitative steps since the discharge order came down. More on that below.

Our Athens bankruptcy lawyers do more than guide debtors through the filing process and stand up for them during court proceedings. We give debtors the tools they need to succeed after bankruptcy. That includes the ability to make a house or other large purchases sooner, rather than later.

Working with Lenders after Bankruptcy and Athens Bankruptcy Lawyers

As mentioned, bankruptcy remains on your credit report long after the house purchase waiting period expires. So, although you are legally eligible for a home loan, obtaining one will not be easy.

Being upfront with the lender is one way to make things go easier. When you first begin working with a mortgage broker or other lender, tell the person about your bankruptcy filing. Also, briefly explain the circumstances. There’s no need to go into detail. A statement like, “In 2020, I lost my job because of the quarantine and I had to file bankruptcy,” normally suffices.

That brief conversation means that the moneylender will not receive a very unpleasant surprise once your credit report comes back.

On a related note, if the lender refuses to work with you because of the bankruptcy, do not take it personally. Some lenders have very strict rules in this area. And, there are plenty of other lenders who will at least give you a chance.

Speaking of other lenders, our Athens, GA bankruptcy attorneys often connect former debtors with lenders who work with bad credit buyers. There are a large number of such lenders. In fact, many creditors prefer working with bad credit borrowers. Banks charge higher interest rates for high-risk loans, which means they make more money.

Just like you had the power to take control over your finances with bankruptcy, you have the power to make yourself a more attractive potential buyer. More on that below.

At What Price Can I Afford a House?

This question is incredibly important and incredibly subjective. Even four or five years after discharge, the bankruptcy financial scars are still quite visible. And, with all the talk of debt-to-income ratios and purchase mortgage insurance, it’s easy to get confused.

No matter what you buy on credit, a sizeable down payment always reduces monthly payments. You have several years to put away a little money each month for a down payment. Take advantage of this time.

In terms of the monthly payment, a good rule of thumb is to match your PIE (principal, interest, and escrow) payment with your Chapter 13 debt consolidation payment amount. You made those payments once and you can do it again.

Bouncing Back from a Georgia Bankruptcy

Athens bankruptcy lawyers help debtors make some small steps toward financial security. If they do these things, after a few years go by, many people do not even remember that they filed.

Start by obtaining a credit card. That might seem like unusual advice, but it’s usually good advice. Charging something every month and making a payment every month is one of the best ways to raise your credit score. After all, your FICO score measures your ability to responsibly use credit, not your ability to pay cash for everything.

Normally, it’s best to find a credit card with a limit under $1,000. Sometimes, it’s best to pay the entire outstanding balance every month. Sometimes, it’s best to pay most of the balance and allow the bank to add interest charges. Monitor your credit report for a few months, try both approaches, and see what happens.

It’s also a good idea to make advance payments on your car, rent, and other secured debts. You will not miss an extra $100 or so per month. And, those small payments quickly add up. With a financial reserve, you’ll be better able to weather the next financial storm.

Include a “designated for principal” note on these cushion payments. Otherwise, the bank will probably apply them to interest, and there is no cushion.

Bouncing Back from a Georgia Bankruptcy

Athens bankruptcy lawyers help debtors make some small steps toward financial security. If they do these things, after a few years go by, many people do not even remember that they filed.

Start by obtaining a credit card. That might seem like unusual advice, but it’s usually good advice. Charging something every month and making a payment every month is one of the best ways to raise your credit score. After all, your FICO score measures your ability to responsibly use credit, not your ability to pay cash for everything.

Normally, it’s best to find a credit card with a limit under $1,000. Sometimes, it’s best to pay the entire outstanding balance every month. Sometimes, it’s best to pay most of the balance and allow the bank to add interest charges. Monitor your credit report for a few months, try both approaches, and see what happens.

It’s also a good idea to make advance payments on your car, rent, and other secured debts. You will not miss an extra $100 or so per month. And, those small payments quickly add up. With a financial reserve, you’ll be better able to weather the next financial storm.

Include a “designated for principal” note on these cushion payments. Otherwise, the bank will probably apply them to interest, and there is no cushion.

Reach Out to an Experienced Bankruptcy Lawyer in Athens, GA

Most people can buy a house two years after they file bankruptcy. For a free consultation with an experienced Athens bankruptcy attorney, contact Morgan & Morgan, Attorneys at Law, P.C. Convenient payment plans are available.

Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.