CHAPTER 13 BANKRUPTCY
FHA will consider appoving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee’s written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.
CHAPTER 7 BANKRUPTCY
At least two years must have elapsed since the discharge date of the chicago chapter 7 borrower and / or spouse’s Chapter 7 Bankruptcy, according to FHA guidelines. This is not to be confused with the bankruptcy filing date. A full explanation will be required with the loan application. In order to qualify for an FHA loan, the borrower must qualify financially, have re-established good credit, and have a stable job.
Studies show that 18-24 months after a bankruptcy discharge, bankruptcy debtors can qualify for a loan on the same terms as if they had not filed bankruptcy. That means that the lender will be much more interested in your down payment, the stability of your income, and the relationship between the loan payments and your monthly income than your past financial troubles.
Is my credit record ruined by filing bankruptcy?
bankruptcy is no more harmful to your credit record than the financial circumstances that lead to the bankruptcy filing. I believe it is much more important for your future financial health to look at your net worth (assets minus debts) than at your ability to borrow in the future.
Most debtors in bankruptcy proceedings, even those who have never missed a payment, couldn’t get new credit from a lender who truly looked at their financial condition. So the fact that there are no negatives on their credit report is only marginally meaningfulwhen looking at the whole picture.
Bankruptcy at least makes all the debt shown in the negative history unenforceable. Objectively, a debtor is a far better credit risk after bankruptcy than before. Subjectively, credit managers are individuals who may not understand bankruptcy or look beyond its negative aspects.
Remember that a bankruptcy is not going to erase the record of your debts listed in your bankruptcy. Credit reporting agencies are within their rights in showing accurate history about your financial affairs. You want to make sure that the bankruptcy discharge also shows on the credit report so that creditors understand that those old creditors have no legal claim remaining.
By Chicago bankruptcy lawyer Troy L Gleason.
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