Can I Qualify for Loans and Credit Cards After Filing Bankruptcy?

It is common for people contemplating filing a Chapter 7 or Chapter 13 bankruptcy in Florida to worry about credit and mortgages after bankruptcy. It is a familiar bankruptcy myth that bankruptcy debtors never qualify for a mortgage or credit card again or it can take ten years or more to qualify for a loan. However, it is an understandable concern,and there is some truth within the misconceptions.

Filing a bankruptcy case does lower your credit score temporarily. However, your credit score will not remain at this lower rate forever,and the drop depends on many factors, including your score before filing and your overall credit history. The good news is that filing a Chapter 7 or Chapter 13 case can help you jump start your efforts to improve your credit score. In addition, the time to qualify for a mortgage or credit card is not as long as you might believe. Our Daytona bankruptcy lawyer can explain more about credit after bankruptcy during a free appointment to discuss your options for getting rid of debt.

Contact our Daytona bankruptcy law firm for a free bankruptcy consultation with an experienced Florida bankruptcy attorney by calling (888) 316-2131 or by using the form on our website.

Applying for Mortgages After Bankruptcy

In most cases, the underwriting policies and the eligibility requirements for certain mortgages are the two main factors in whether you qualify for a mortgage. Certain types of mortgages have waiting periods that the lenders have no control over. Therefore, it is helpful to know the waiting periods for the various types of mortgages so that you can continue working on improving your credit score after bankruptcy while you wait until you are eligible to apply for the type of mortgage you prefer.

Conventional Loans
The government does not back conventional loans; however, most lenders have waiting periods before you can qualify for a conventional loan after bankruptcy. In many cases, banks require that a Chapter 7 discharge is at least four years before the loan application and a Chapter 13 discharge is at least two years before the loan application.
VA Loans
VA loans are not issuedby the Department of Veterans’ Affairs (VA). Even though these mortgages are for service members, spouses, and veterans, the loans are offered by various mortgage companies. Because the VA backs the loans, applicants may receive better interest rates and terms than they would with another type of mortgage. In most cases, a loan applicant must wait at least two years after the date of his or her bankruptcy discharge, regardless of the chapter of bankruptcy filed. However, some applicants may qualify earlier if they write a letter explaining why they needed to file bankruptcy and how their financial situation has changed since that time.
FHA Loans
Lenders approved by the FHA can offer mortgages insured by the Federal Housing Administration (FHA). As with VA loans, applicants may receive better terms with an FHA loan because a government agency backs the loan. In most cases, a Chapter 7 debtor can apply for an FHA loan two years after the date of the bankruptcy discharge. Chapter 13 debtors can apply for an FHA loan one year after the bankruptcy discharge; however, some Chapter 13 debtors could qualify sooner for an FHA loan.

Beware! You will find companies who are willing to approve a mortgage within months after a bankruptcy discharge or before you can apply for a conventional loan. However, these companies are often finance companies instead of large banks. Therefore, the terms of these mortgages are usually very unfavorable for the homeowner. High-interest rates, unnecessary fees, and other costs are added to the amount of the mortgage to increase how much money you will pay over the term of the loan.

It is often best to wait until you can qualify for a conventional, FHA, or VA loan. While you are waiting to be eligible to apply for a mortgage, you should work on improving your credit score and increasing the amount you save for a down payment. With time and effort, you can qualify for a conventional mortgage to purchase the home of your dreams after bankruptcy helped you eliminate debt to gain a fresh start.

Applying for Credit Cards After Bankruptcy

Some debtors report receiving credit card applications within weeks or months of receiving their bankruptcy discharge. Beware!

As with some mortgage companies that approve loans very soon after a bankruptcy discharge, the terms offered by these credit card companies can be extremely unfavorable for you. High-interest rates, low credit limits, expensive fees, and high minimum payments make these cards a bad choice for most people who have just completed a bankruptcy case. These companies know that you may be desperate to rebuild your credit after bankruptcy and willing to accept any offer to help you re-establish credit. However, there are better ways to improve your credit score after bankruptcy.

Instead of accepting these quick credit offers, try to wait a few months or a year. By making your secured loan payments on time and avoiding other credit mistakes, your credit score may improve in as little as a year after filing for bankruptcy relief. At that time, you may want to consider a secured credit card.

Companies that offer secured credit cards require a deposit to “secure” the charges you make with the card. However, if you pay your payments on time each month, you can use the secured credit card to improve your credit score. Before accepting a secured credit card, you should verify that the company reports your information to the credit reporting agencies so that your efforts are rewarded with positive notations on your credit reports.

As your credit score improves, you can qualify for a variety of loans and credit accounts. However, you must be careful when using credit so that you do not over-extend your finances. The information you learned during your Credit Counseling Course and Debtor Education Course can be very useful as you venture back into credit after bankruptcy. You can also find more information about using credit wisely on the Consumer.gov website.

Are You Ready to Get Out of Debt? Talk to a Daytona Bankruptcy Lawyer Free of Charge!

If you are struggling with debts that you cannot pay, our Daytona bankruptcy attorneys can help. After reviewing your financial situation, we advise you of the various bankruptcy and non-bankruptcy options for eliminating debt. Our lawyers help you narrow down the options to the best choice for you based on your financial situation.

Contact our Daytona bankruptcy law firm by calling (888) 316-2131 to schedule a free bankruptcy consultation with an experienced Florida bankruptcy attorney. Find out how you can get out of debt fast and on the road to financial well-being.