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When Can I Get a Mortgage After Bankruptcy in North Carolina?

Published June 24, 2021 by Sasser Law Firm
When Can I Get a Mortgage After Bankruptcy?

One of the questions many people have is “Can I buy a house after bankruptcy?” They might be worried about being able to obtain financing and how bankruptcy might affect their credit.

The experienced bankruptcy lawyers at Sasser Law Group have provided the following information about bankruptcy and mortgage financing:

Chapter 7: Liquidation

In a Chapter 7 bankruptcy, most of your assets are sold to pay back as much of your debts as possible. Your remaining debts are then discharged. A Chapter 7 bankruptcy filing stays on your credit report for up to 10 years. However, this does not mean you will be unable to obtain a mortgage for that entire 10-year period.

Though you will likely be unable to obtain a mortgage while your Chapter 7 bankruptcy case is working its way through the courts, you will have a better chance once the case is complete and your debts are discharged.

In some ways, getting a mortgage after Chapter 7 is sometimes easier because you don’t have substantial debts dragging down your credit score or inflating your debt/income ratio. Within a few years of your debts being discharged, you will have a decent chance of obtaining a mortgage.

Chapter 11: Reorganization

Chapter 11 bankruptcy is most often used by businesses, though individuals can sometimes go this route. A Chapter 11 bankruptcy is a debt reorganization plan rather than a liquidation, which can make the bankruptcy process last longer. However, you’ll keep more of your assets.

Chapter 11 bankruptcy filings stay on your credit report for ten years, though you might be able to obtain a mortgage before that period runs out.

Chapter 13: Adjustment of Debts

Filing for bankruptcy under Chapter 13 is the other most common way people handle a personal bankruptcy case, aside from Chapter 7. However, Chapter 13 bankruptcy cases work a bit differently than Chapter 7 cases.

Instead of having to liquidate your assets, Chapter 13 bankruptcy cases allow you to put together a repayment plan to present to your creditors. Assuming the plan is approved, you can repay your debts over a period of three to five years.

After you’ve finished paying back your creditors under the terms of your repayment plan, your remaining debts are wiped out. A Chapter 13 bankruptcy filing stays on your credit report for seven years. Once you’ve completed your repayment plan, you’ll likely have a better chance of obtaining a mortgage after Chapter 13.

Tips for Getting a Mortgage After Bankruptcy

Some tips we have for getting a mortgage after filing for bankruptcy include:

  • Explore different loan options. Loans backed by government agencies like the Federal Housing Administration or the VA may have more flexible or forgiving terms or conditions to get a mortgage than if you went with a private lender.
  • Make all of the payments under your debt reorganization plan. If you file for bankruptcy under Chapter 11 or Chapter 13 of the Bankruptcy Code, you’ll be paying back a portion of your debts for three to five years. If you miss any payments, you could wind up in even bigger trouble, making it even harder to get a mortgage.
  • Rebuild your credit. Getting a secured credit card and making all your payments on time can help creditors feel more secure lending money to you.
  • Make a budget and stick to it. A key way to get a mortgage after bankruptcy is to show you can live within your means. So, make a budget and keep to it.

Contact a Bankruptcy Lawyer Today

If you have any more questions about bankruptcy and mortgages, our team is here to answer them for you. We have more than 20 years of experience helping North Carolina residents with bankruptcy issues. Get a free initial consultation by calling our office in Cary, NC, or visiting our contact page.

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