Chapter 7 Bankruptcy and a Home Mortgage

If you have gotten into debt to the point where you see no escape from it and it just keeps getting worse then the best course of action for you to take is to file for Chapter 7 bankruptcy. A Chapter 7 bankruptcy will have you finished and done with the bankruptcy in six months time. You also will not be required to pay back the debts that got you into the mess in the first place. The bad news however is that your credit report will show the bankruptcy for a period of 10 years (from the date it was filed) and your credit rating will suffer terribly because of it. This will limit the kinds of credit that you may be qualified to receive for those 10 years.

When faced with this decision, it is essential that you figure out what the worst scenario is- living with mountains of debt (which affects your credit adversely any way) or filing for Chapter 7 bankruptcy and being rid of debt but having an even more tarnished credit rating. Be aware that this type of bankruptcy can be filed only once in a 7 year period.

A Chapter 7 bankruptcy can help a person to get back on their feet in a financial sense but it can also ease much of the stress and mental anguish that accompanies constant worries about a lack of money to pay bills. New stricter laws came into effect in October 2005 regarding Chapter 7 bankruptcies that have made it more difficult for some people to qualify. For example, those who make what is deemed as a high income are more likely to have to file for Chapter 13 bankruptcy which involves a repayment plan and debt reorganization. Financial counselling is required for individuals wishing to file for bankruptcy to determine which is more suitable for them- the Chapter 7 or the Chapter 13.

Always check over your credit report following a bankruptcy. Not all creditors inform the credit bureau that a debt has been cleared following a discharge. It then becomes the former bankrupt individual's responsibility to become proactive and make sure that their credit report looks as it should. Once that is completed, the next step is to apply for a secured credit card.

Before you even begin to contemplate applying for a mortgage after bankruptcy, find a qualified and experienced mortgage specialist whom you can trust and whom you feel comfortable speaking with about your financial circumstances. This person can work with you to help you to walk the long and arduous road to improved credit and more financial stability.

Obtaining a mortgage following a Chapter 7 bankruptcy is not an impossibility. However you must plan accordingly and take the right strategic steps. There are some mortgage lenders who will give you the highest grade shortly after your bankruptcy has been discharged. This of course is contingent on your payment history in the past. You would be better off waiting for awhile until the bankruptcy recedes further into the past and you have given yourself the time you need to re-establish your credit adequately before moving ahead with a mortgage application.