Though it is designed to relieve you of your debt issues, bankruptcy can cause huge problems for you too; especially when it comes to getting loans. When any individual files for bankruptcy, it becomes public record and appears on their credit report. This makes prospective lenders aware of the risk associated with lending money to you. Hence, you find very few creditors willing to give you the loan at rates and conditions which are acceptable to you. In case you wish to get a mortgage loan after going through Chapter 7 bankruptcy, you will find that things are not exactly favorable for you.
According to Los Angeles based bankruptcy law firm Recovery Law Group lawyers, getting a loan at favorable terms is a bit difficult, especially after a bankruptcy. Despite getting a discharge for your loans, your credit report is not wiped clean. Since Chapter 7 bankruptcy involves no repayment of loans, this remains on your credit report for a duration of 10 years. Thus, if you wish to get credit at reasonable rates and fees, you need to make efforts to rebuild your credit. This takes time and effort on your part but with good payment history, you can qualify for mortgage loan too!
Steps for rebuilding credit after bankruptcy
People who file for bankruptcy have the option of choosing from Chapter 7 or Chapter 13 bankruptcy. They can also decide to reaffirm a loan when they choose to keep a car or home or credit accounts which they could have surrendered. Making continuous and timely payments on such accounts, after bankruptcy, can be a great way to rebuild your credit history. Other steps include:
- Applying for secured credit cards with the bank. This option is a great choice for people who have no positive accounts open which can help re-establish credit. Using this type of card for making payments on essential items like utilities etc. and living within means can slowly improve your credit rating.
- You could also ask a family member or friend to co-sign a loan or open a joint an account with you.
With time and steady work, your credit score improves, allowing lenders to put faith in you. Sometimes, you might even qualify to get a mortgage loan at normal interest rate before the bankruptcy is removed from your credit history.
When can you apply for a mortgage loan?
An individual fresh out of bankruptcy discharge, applying for a mortgage loan will not get any offers, even at the high interest rate. However, with time, things can be better, especially if you have worked hard to improve your credit rating. A Chapter 7 bankruptcy remains on your credit history for 10 years while Chapter 13 bankruptcy Los Angeles for 7 years. If within that time frame, you have developed a positive credit and established yourself financially, then you can opt for a mortgage loan. Pre-qualifying for a mortgage is one thing and getting it at a reasonable rate is another. If you get a loan at favorable terms, you are in luck; in case you don’t, you can always wait for your bankruptcy to be removed from the credit report before reapplying.
Bankruptcy does not need to be a huge problem, especially with experienced lawyers by your side. If you wish to seek professional opinion on your case, you can call 888-297-6023 to schedule an appointment.