Bankruptcy is a reality for many Tennessee residents struggling with debt. Sometimes, it is the only way out of a bad financial situation. Many people who have filed for bankruptcy wonder how long they will have to wait before they are able to buy a home. The answer depends on many factors, such as the type of bankruptcy filed and what steps the debtor has taken to repair his or her credit rating.
There are two types of personal bankruptcy: Chapter 7 and Chapter 13. With Chapter 7, a debtor will be released from obligations of all unsecured debt. A Chapter 13 bankruptcy differs because the debtor pays back some of their debts through a payment plan. Lenders tend to look more favorably on debtors who have elected to file a Chapter 13 bankruptcy because they are still paying back their debts.
Most people will need to wait two years after they have filed for bankruptcy before a lender will consider approving them for a loan. Other lenders, such as the FHA, have a one-year limitation period before a loan will be approved. The time starts on the date of the bankruptcy discharge.
Lenders will also consider what has happened since the bankruptcy. It is a good idea for anyone who wants to buy a home to try to improve their credit by making sure they make on-time payments consistently and check for credit report errors.
Bankruptcy can be a good way to obtain a financial fresh start. A debtor may be able to discharge some or all of his or her unsecured debt. Once a bankruptcy is filed, creditors are no longer allowed to contact the debtor, garnish wages or seize property. While a bankruptcy may make obtaining a loan difficult for a period of time, it can be a way for many people to get their finances back on track.