Many Arizona residents facing financial hardship may shy away from filing for bankruptcy because of the perceived social stigma attached to it. However, many people declare bankruptcy due to factors outside of their control -- an unexpected illness, suddenly losing their job and even the sudden economic recession that affected everyone across the country a few years ago.
With the economy slightly improving and the housing market improving, Arizona residents may find themselves ready to buy a house again, but unsure of their eligibility because they declared bankruptcy to wipe out most of their bills. However, recognizing the difficulties many people faced in the recession, the Federal Housing Administration has changed many of its rules for people coming out bankruptcy.
Where previously the waiting time for FHA financing (FHA backed mortgage) after a bankruptcy where the buyer faced an economic whereby the value of their household income fell by 20 percent or more for at least six months was two years, now the period has been reduced to one year. For conventional loans, filers of Chapter 13 bankruptcy must wait two years.
Chapter 13 bankruptcy is a form of personal bankruptcy where the debtor makes court supervised payments to repay their debts. When the filer has a source of income that does not make it possible for them to repay their debt, they may be eligible for this bankruptcy, as the court calculates debt payments based on their income. Arizona residents facing financial difficulties but afraid of life after bankruptcy can rest assured that financial lives only improve after filing for bankruptcy. Soon after they discharge their debts, they may become eligible for loans and mortgages once again.
Source: UT San Diego, "Guidelines for repurchasing a home after financial hardship," Feb. 1, 2014