Bankruptcy can be very helpful, but many people worry about the impact of seeking financial relief. They know that bankruptcy can force the closure of their revolving lines of credit. They may also be worried about their eligibility for credit in the future.
For many people, homeownership is one of their biggest life goals. Even those who already own a home may plan to upgrade or downsize later in life when they have children or retire. People may worry about whether a bankruptcy could prevent them from qualifying for a mortgage later. Does bankruptcy effectively cut people off from the possibility of qualifying for mortgages?
Filers may be temporarily ineligible
Most of the time, individuals hoping to secure a mortgage must wait some time after a bankruptcy filing. Generally speaking, people may not be eligible for a mortgage or other large loan in the first year or two after a bankruptcy.
However, as more time passes, the bankruptcy has less impact on the filer’s eligibility for a mortgage. When the bankruptcy eventually comes off their credit report, it no longer has any impact on their ability to qualify for a mortgage.
If the filer pursues a Chapter 7 bankruptcy, the record of the bankruptcy comes off their credit report after 10 years. That timeline shortens to seven years after a Chapter 13 bankruptcy.
Taking control of financial circumstances by filing for bankruptcy may temporarily make securing a mortgage impossible. However, filers can typically rebuild their finances after their discharge. Reviewing debts and long-term financial goals with a professional familiar with the law can help people take control of their finances without sacrificing their future opportunities after a bankruptcy filing.
