Can A Bankruptcy Trustee Take My Home
Itâs not common, but itâs possible in certain circumstances.
The bankruptcy trusteeâs job is to sell non-exempt property for the benefit of unsecured creditors. That includes personal property and real property. Whether your home is safe from the trustee depends on whether it has any ânonexempt equityâ which in turn depends on its market value.
As a reminder, hereâs how we calculate equity in this scenario:
Traditional Or Prime Insured Mortgage:
To qualify for a traditional mortgage, which may give you the best rate, you must meet the following requirements:
- have been discharged from bankruptcy for at least two years and one day
- have at least one year of re-established credit showing on two credit items usually with a minimum combined credit amount of between $2,500-$3,000
- have a minimum down payment of 5% for the first $500,000 of your purchase, 10% for any amount over $500,000
- if your down payment is less then 20% down you must have mortgage insurance available through Canada Mortgage and Housing Corporation
- your minimum LTV is 95%
- your maximum TDS is 44%
How Long After A Chapter 7 Bankruptcy Can I Buy A House
A Chapter 7 bankruptcy is a debt elimination program designed to help eliminate unsecured debts that you can no longer afford to pay. Rebuilding your credit after a Chapter 7 discharge requires managing credit wisely and establishing a positive payment history for all of your bills.
Typically, you will qualify for a new home purchase within 2 years of a Chapter 7 court discharge, depending on each bank’s lending standards. Other factors include how you have managed your credit since the discharge and your income at the time of the loan application.
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Howard Dvorkin Cpa Answers
In the three short sentences you wrote, Lorena, theres a lot to deconstruct. So lets dive right in
There are several kinds of bankruptcy, and each has different rules and consequences. For instance, Chapter 7 bankruptcy, often called straight bankruptcy, eliminates unsecured debt when you give up your assets. That kind of bankruptcy stays on your credit report for 10 years.
Meanwhile, a Chapter 13 bankruptcy stays on your credit report for only seven years.
Why is this important? Well, if youre trying to buy a car, and your Chapter 7 bankruptcy was in 2009, its still on your credit report and lenders will see it. However, if you filed for Chapter 13, its now eight years later and has disappeared from view.
This is crucial because lenders pull your credit report before giving you money. If youre buying a car and seeking an auto loan, a bankruptcy will make the terms of that loan more expensive for you.
OK, so thats how bankruptcy can affect your impending car purchase. The second half of your question is about . Here again, there are several possibilities. In other words, when you talk about consolidating my credit card debt, that topic has several possible tactics within it.
Of course, the only way to get a low interest rate is to have a high credit score. If you declared bankruptcy in 2009 and its still on your credit report, this option isnt likely to work.
Consider it, Lorena.
Buying A House After Bankruptcy: Ways To Woo A Lender
To start the mortgage process, lenders require a detailed letter explaining why you needed to file for Chapter 7 or Chapter 13 in the first place. Ideally, the bankruptcy would have been caused by an extenuating circumstance beyond your controlsuch as the death of an income-contributing spouse, the loss of employment, or a serious illness.
In other words: A lender likes to see that you were hit with hard times that had a significant negative impact on your expenses or income, and made it impossible to meet your financial obligations.
What a lender wont want to see is someone with a die-hard shopping habit or a lackadaisical attitude toward paying credit cards on time. If thats you, youll have to prove youve changed.
Whatever the reason you filed for bankruptcy, lenders will need to properly document your extenuating circumstances, so be prepared to provide proof detailing your life event.
Medical bills, a doctors note, a death certificate, or severance paperwork are all acceptable evidence that prove to lenders that you are a safe bet worthy of a home loan.
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How Can I Buy A House After Bankruptcy
The good news is you can still buy a new home even if you declare bankruptcy. It may be a long process and require extraordinary effort, more than the average prospective homeowner.
Legally, you have to wait until the judge dismisses your bankruptcy before getting a loan. Still, later on, it overall depends on how fast you can get your finances back in order.
Can I Buy A House 1 Year After Chapter 7 Discharge
In most cases, theres at least a twoyear waiting period from your Chapter 7 discharge date until you can be approved for a home loan.
There are some limited circumstances in which you can obtain a loan after one year from the discharge, explains Andrea Puricelli, production resources engagement manager for Inlanta Mortgage.
But thats only if the bankruptcy was caused by extenuating circumstances beyond your control and youve since exhibited an ability to manage your financial affairs responsibly.
Such extenuating circumstances could apply if you were forced into bankruptcy due to a serious illness or major job loss or income reduction.
But in most cases, it takes more than a year to recover after declaring bankruptcy. So most home buyers will have to wait two years or more before applying anyway.
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What Types Of Mortgage Loans Can You Get After Bankruptcy
Technically, you can qualify for any kind of mortgage. As we have shown, some have waiting periods, and some of those waiting periods are longer than others. If you meet that waiting period and believe you qualify, you can apply for any loan.
That being said, FHA Loans may be the most advantageous option. The waiting period is shorter after Chapter 7. After Chapter 13. there is no waiting period after the court discharges or dismisses you.
FHA loans also have lower credit requirements than conventional loans. That matters because Chapter 7 bankruptcy will show on your credit report for 10 years, Chapter 13 for seven. FHA loans can be approved with a credit score as low as 580. A down payment of at least 10% may mean you can qualify with a credit score as low as 500.
To qualify for a conventional loan, your credit must be re-established, which means making timely payments on your court-ordered plan in Chapter 13, and paying bills on time after Chapter 7. Typically a conventional loan will require a minimum credit score of 620.
VA loans are provided to veterans and typically are more lenient when it comes to credit history. A USDA loan is for homes in qualifying rural areas. To qualify, the borrowers income cannot exceed 115% of the median income in the area where the home is being purchased. Generally, USDA loans require a credit score of 640, so boosting that score is important.
Your Desired Target Price Range
After 12 to 24 months of hard work, you are ready and know much more on buying a house after bankruptcy. Therefore, the purchase process begins. Take into account the following aspects to define what you need in your home.
- How much can you afford?
- Where do you want to live?
- What characteristics are essential in my house?
Note: Use a mortgage calculator to find out how much mortgage you can get without having to make monthly payments. With this you can establish a more correct target price range.
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Purchasing A Home After Chapter 7 Bankruptcy
A typical no-asset Chapter 7 bankruptcy case takes between four and six months to close. However, the Chapter 7 filing remains on your credit report for ten years. That does not mean that it will be ten years before you can qualify for a home loan. Depending on the type of loan and your specific financial circumstances, you could qualify for a loan to purchase a home as soon as a year after filing for bankruptcy relief.
The type of home loan has a great deal to do with when you can buy a house after Chapter 7 bankruptcy. There are rules for some home loans that prevent the borrower from qualifying for the home loan for a specific period after bankruptcy.
For example, the waiting period for most FHA loans is two years after the date of the bankruptcy discharge. However, you could qualify for an FHA loan after one year if you can prove that the bankruptcy was caused by circumstances that were not within your control, such as a federal disaster or being laid off from work. Likewise, the waiting period for a VA loan is usually two years after a Chapter 7 bankruptcy discharge.
Fannie Mae backed conventional loans have different waiting periods. Most loans backed by Fannie Mae require a four-year waiting period to buy a house after Chapter 7 bankruptcy. However, the waiting period could be reduced to two years in some cases.
Is It Hard To Buy A House After Bankruptcy
Getting a loan will be very difficult for a few years immediately following a bankruptcy, says Reggie Graham, branch manager for Silverton Mortgage.
He notes that home buyers applying after bankruptcy can often expect bigger down payment requirements and higher interest rates.
Your focus should be on rebuilding your credit to prepare for applying for a mortgage loan when youre ready, says Graham.
Keep in mind that a bankruptcy filing stays on your credit reports for 10 years.
This doesnt hinder your ability to buy a home. But its realistic to acknowledge that a lender is going to consider that fact when reviewing your loan request, cautions Heck. My suggestion is to expect two to three years to rebuild your financial health following a bankruptcy.
Graham also suggests the wait time to buy a home may be shorter if you file a Chapter 13 bankruptcy instead.
Chapter 13 involves paying back an agreedupon portion of your debt, which lenders look more kindly upon, he explains.
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How Soon Can I Sell My House After Bankruptcy
If you can’t afford to pay your bills, bankruptcy can help you discharge your debts and start over. As soon as the bankruptcy case is closed, you can sell any of the assets you still own, including your home. However, selling your home after bankruptcy may be problematic if you plan to by a new one.
Can You Buy A House After Bankruptcy
Although often necessary, filing for bankruptcy brings concern and worry that your finances may never recover. Many people believe that filing bankruptcy means never being able to buy a house. However, bankruptcy is more common than you might think. In fact, many people who have previously filed for bankruptcy do recover financially and end up purchasing a new home once their finances are back in order.
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Be Aware Of Additional Fees And Expenses
Fees for inspections, appraisals, title processing, and escrow needs can add up quickly.
These fees can be built into your loan or added to your initial expenses. Keep in mind that when combined with your loan, these costs affect the monthly payment and the total interest you pay over the life of the loan.
Be sure to factor in these expenses for your future goals. You will have worked hard to rebuild your credit and with the goal in mind of buying a house after bankruptcy.
How Do I File For Bankruptcy
The first step is to meet with an MNP LTD Licensed Insolvency Trustee. Together, you will review all available options, including bankruptcy alternatives like consumer proposals, debt consolidation and credit counselling. If, after going through your options, you decide that bankruptcy is the right debt relief solution for your situation, your Licensed Insolvency Trustee will guide you through the process in detail.
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Check Your Credit Score
The last step you should take before you start actively looking and making offers. Check your credit score. You can purchase one of your credit scores through a credit bureau or you can enroll in a to get your scores from one or three bureaus.
Remember, you usually wont need this service forever so typically only need this for a few months while you make sure your score is as high as possible before you go to apply for a loan. Using this strategy, you can make sure your credit score is maximized, then go to a lender to get the mortgage pre-approval you need to make the search for your new home easier.
Buy A Seller Financed Home
There are real estate investors who buy houses that have gone up for auction or have been foreclosed on back taxes. As a general rule, they will get them at a very good price and sell them quickly.
Some will sell these houses just as they were, that is, without a credit check and with 0% interest.
This is one way of buying a house after bankruptcy, even with bad credit.
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Whats The Difference Between A Bankruptcy Filing Date And A Discharge Date
The filing date is the day you file a petition with your local bankruptcy court. The discharge date is the day youre no longer liable for the debts included in your bankruptcy. This date could be a few months after the filing date or several years later, depending on whether you file Chapter 7 or 13.
Every Bankruptcy Is Different
This post gives an overview of some of the major challenges when buying real estate through the bankruptcy court. However, the most important thing to remember is how different each and every transaction will play out in the bankruptcy process. There is no great way to predict your success or failure, and you need to be prepared for a bumpy process where you may or may not get the home. There is a ton of complexity that cant be discussed in a short article like this, and you will be best served by working with real estate professionals and attorneys who are well-versed in the bankruptcy process if you intend to make an offer. Seek your counsel carefully, as most agents and attorneys have no experience in this type of transaction.
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A Little New York Bankruptcy Lawyer Humor
A man is at the doctors office and finds out he needs surgery on his hand. The man looks at his doctor and asks, doctor, after the surgery will I be able to play the violin?
The doctor replies, Sure, after the surgery you will be able to play the violin. The man smiles and says, Thanks doc, because I always wanted to be able to play the violin
Sometimes I feel just like the doctor when people ask me if they can buy a house after bankruptcy. People come into my office, making $30,000 per year with two children. They have $20,000 of debt and are barely able to pay rent. I tell them that they need bankruptcy and they ask me but will I be able to buy a house afterwards?
So, the first answer is that if you need bankruptcy, then bankruptcy is certainly the fastest path to home ownership. Click or tap the blue links to read about credit scores and how bankruptcy will improve your credit score faster than not filing bankruptcy.
In order to buy a house, you need to have good credit. If you have a huge debt to income ratio, and you cannot pay your monthly credit card payments, your credit score is terrible. Before you think about buying a house, you need to get rid of your debt and rebuild your credit. For most people reading this right now, unless they expect a very dramatic increase in income or have a lot of money coming from a settlement or family member, nothing will help restore your credit like bankruptcy.
Begin Repairing Your Credit As Soon As Possible
There are a few things you can do right away to begin repairing your credit score. The first is to pay all of your bills on time each month so that you can rebuild your payment history.
You should also keep your oldest credit accounts active, even if you dont use them. The length of your credit history accounts for 15% of your credit score, so this is a simple way to refrain from losing any more points.
Buying a house after bankruptcy is by no means unattainable. It just takes patience and diligence to rebuild your credit scores while waiting out the seasoning period.
Theres A Waiting Period
Taking out a mortgage when buying your first house means taking on potentially hundreds of thousands of dollars of debt. After filing for bankruptcy, lenders wont be willing to work with you until you prove that you have your finances in order. Thats why they establish a waiting period before you can apply for financing. The exact waiting period depends on the type of loan you apply for.