Bankruptcy Home Purchasing

Bankruptcy Home Purchasing: Your Options Before, During, & After

An Atlanta Legal Team with the Answers You Need

Many borrowers incorrectly assume that filing for bankruptcy means they will lose their home. And some people hesitate to file for bankruptcy because they believe it will make them ineligible to purchase a new home in the near future — or even that it will prevent them from ever purchasing a home.

At Holston & Huntley, we’re here to dispel these assumptions. They simply aren’t true, and, if you believe them, they might stop you from taking advantage of the financial reorganization that bankruptcy provides. In most cases, filing for bankruptcy puts borrowers in a better financial position to qualify for a home purchase when they’re ready.

Our Atlanta legal team can provide the guidance you need. Call (404) 620-3337 or contact us online today.

Purchasing a Home Before Filing Bankruptcy

The reason why bankruptcy can jeopardize real estate is because it’s a type of secured debt, meaning it’s secured by collateral, and it cannot be discharged through bankruptcy. Your lender has the contractual right to seize your home through foreclosure if you fall behind on payments. But the level of risk depends on the unique factors of the homeowner’s circumstances.

The effect that bankruptcy will have on your home generally depends on 3 factors:

  1. The type of bankruptcy you file;
  2. Whether you can stay caught up on mortgage payments through the end of the bankruptcy process; and
  3. What equity you may be able to protect under state or federal exemption laws.

While neither Chapter 7 nor Chapter 13 will discharge your mortgage debt, Chapter 13 gives you significantly more time (years instead of months) to catch up on arrears. After assessing all the above factors, you can determine whether you might lose your home through bankruptcy, which will tell you whether or not to buy a home now.

Purchasing a Home During a Chapter 13 Bankruptcy Filing

Chapter 13 does not disqualify you from obtaining an FHA-insured mortgage during your bankruptcy. After just 12 months of your 3-5-year plan, you could be in a great place to qualify for a mortgage loan.

To qualify, your payment performance must be satisfactory, meaning you have made all payments on time. You must also have received written permission from the bankruptcy court to enter into the mortgage transaction. These are fairly simple requirements, so you could be closer to homeownership than you think—even during Chapter 13 bankruptcy.

Purchasing a Home After a Bankruptcy Filing

If you want to buy a home after bankruptcy, there are just a few things to consider. Generally, two years must pass since the discharge date of your bankruptcy filing before you can qualify for an FHA mortgage loan.

You can usually prove that this time has lapsed by providing the mortgage company with a credit report. However, if the credit report does not verify the discharge date—or if additional documentation is necessary to determine if any liabilities were discharged in the bankruptcy—you’ll need to provide the mortgage lender with the bankruptcy and discharge documents.

Chapter 7 “liquidation” bankruptcy DOES NOT disqualify you from obtaining an FHA-insured mortgage if, at the time of case number assignment, at least two years have elapsed since the date of the bankruptcy discharge. During this time, you must have re-established good credit or chosen not to incur new credit obligations.

An elapsed period of less than two years (but not less than 12 months) may be acceptable if:

  • You show that the bankruptcy was caused by extenuating circumstances beyond your control; and
  • You have exhibited a documented ability to manage your financial affairs in a responsible manner.

Get in Touch with Us Today

Purchasing a home and navigating the bankruptcy filing process can be challenging. It often involves multiple statutes, rules, and procedures—but, with the right legal help, it is possible. The process will be much easier if you consult our team at Holston & Huntley. We provide trustworthy and prudent legal advice, prioritizing your interests every step of the way.

We offer free consultations and payment plans for both Ch. 7 & Ch. 13 bankruptcies. Call (404) 620-3337 or contact us online today!

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At Holston & Huntley, we provide both bankruptcy and personal injury services. These areas inform each other, as injuries often wreak havoc on an individual or family’s financial wellbeing. If you’ve been in a car or truck accident, been bitten by a dog, or experienced the loss of a loved one, our skilled and empathetic attorneys can handle the legal aspects of your personal injury or wrongful death claim so you can focus on your recovery.

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