Declaring bankruptcy is one way for Arizona residents to gain control of their financial life. In addition to wiping out debts, bankruptcy is also a means to retain ownership of household possessions, and the house itself, in some circumstances.
But some Arizona residents may be hesitant to declare bankruptcy not only because of the stigma they perceive to be attached to it, but also because they are afraid of the effect on their credit score and ability to obtain a home loan in the future. However, they will be relieved to hear that one to two years after filing for Chapter 7 or Chapter 13, they may be eligible for a home loan or financing.
In addition to qualifying for conventional financing one or two years after filing for Chapter 13 bankruptcy, it may be possible to obtain a loan even earlier if the lender decides the bankruptcy was filed due to circumstances outside of the borrower's control, such as unemployment. Filers should keep all documents related to the bankruptcy to help show the circumstances that led up to it.
Establishing strong credit after filing for bankruptcy is very important for filers--paying bills on time is one way to ensure this takes place. Lenders need to see at least one year of consistent bill paying for utilities and rent.
Getting a credit card and using it wisely is another way to reestablish credit. Filers may wish to determine whether they qualify for a secured credit card or as a dependent on someone else's credit card.
Even though it takes time, bankruptcy filers can rebuild their credit. Arizona residents who are contemplating bankruptcy should understand that they can emerge from bankruptcy on stronger financial footing. This includes qualifying for home loans down the road.
Source: Business Insider, "Even after bankruptcy, you are still eligible for a mortgage," Michele Lerner, Oct. 10, 2012