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Can You Get A Loan After Filing Bankruptcy

Type Of Bankruptcy Filed

Where to Get Loans After Filing Bankruptcy

When you filed for bankruptcy, you likely took one of the two most common paths: Chapter 7 or Chapter 13. The form of bankruptcy you chose could impact your eligibility for a personal loan differently, on top of any restrictions imposed by the court.

  • A Chapter 7 bankruptcy, also known as a liquidation bankruptcy in which most of your property is sold to repay creditors, can stay on your credit report for up to 10 years.
  • A Chapter 13 bankruptcy, also known as a repayment bankruptcy is usually erased from your credit report after a maximum of seven years. Consequently, its impact on your ability to get a personal loan is shorter than Chapter 7.

Also, since new credit is generally discouraged during your Chapter 13 repayment plan, you may have to work with the courts to get permission to take out additional credit unless you apply after bankruptcy discharge.

Speak To An Experienced Mortgage Broker

The smartest move you can make, right from the outset, is to speak with a mortgage broker with the right knowledge and experience of dealing with applications of this nature, rather than approaching any lenders directly yourself.

A broker will be able to guide you towards those lenders who can help and also provide assistance with the application process. This is something we can help you with through our free, broker-matching service.

If you get in touch, we can arrange for a broker we work with to contact you directly and discuss further.

What Type Of Mortgage Can You Get After Bankruptcy

Its technically possible to get any type of mortgage loan after a bankruptcy. There are no rules in place that permanently exclude you from getting a certain type of loan because youve gone through a bankruptcy. As long as you meet the waiting period discussed above, youre free to apply. But you can qualify for some types of mortgage loans much easier than others.

An FHA loan could be a great option if you have a bankruptcy on your record. FHA waiting periods are shorter than other types of loans. If you have a Chapter 13 bankruptcy, theres no waiting period at all after a court dismisses or discharges you. FHA loans also have looser requirements compared to other types of government-backed loans.

One of the major benefits of getting an FHA loan after a bankruptcy is its lower credit requirements. Even after a court dismisses or discharges your bankruptcy, it will still negatively influence your credit score. A Chapter 7 bankruptcy will stay on your credit report for 10 years, while a Chapter 13 bankruptcy will stick around for 7.

During this time, your credit score will be much lower than before your bankruptcy. You can buy a home with an FHA loan with a credit score as low as 580 points. You may even qualify for a loan with a score as low as 500 points if you have a down payment of at least 10%. However, at Rocket Mortgage®, the minimum credit score is 580.

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Fill Out A Formal Application

When youre ready, fill out a formal application with the lender of your choice. Expect to not only provide the information we outlined above but also show proof of your financial information. For example, you may be asked to submit pay stubs as proof of income and a copy of your passport to prove your identity.

Many lenders will provide a loan decision within one business day. But others may take several days to respond.

I Have A Bankruptcy And A Foreclosure How Does That Work

FHA Says You Can Qualify for a Mortgage Two Years After ...

It is not uncommon to be going through bankruptcy while also having a mortgage. You may choose to reaffirm the mortgage and keep the property. Or you may choose to include the mortgage in the bankruptcy. In that case, your obligation to the mortgage lender ends, and so do your rights to occupy the property.

However, it can take some lenders years to actually foreclose on these homes. Should you be afraid of restarting the clock if your bankruptcy waiting period is up, and then the lender finally forecloses?

If you did not reaffirm your mortgage and did not continue to make payments, but did continue to live in the home, that foreclosure will probably be considered a separate and later event. And your wait to buy again starts over, and it will be longer.

If you cant pay your mortgage when you go through bankruptcy, make sure its included in the bankruptcy and you agree to return the property to the lender. If the bankruptcy documents absolve you of responsibility for the mortgage, the lender applies the shorter post-bankruptcy waiting period when you apply for a new loan.

But if the foreclosure is unrelated to the bankruptcy and occurs later, the lender applies the longer post-foreclosure waiting period. In the case of a conforming lender, thats seven years following the actual foreclosure, not the bankruptcy.

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You Can Probably Get A Business Loan After Bankruptcy But It Will Be More Difficult Learn What Steps To Take To Increase Your Chances Of Getting A Loan

By Hari Ender, Attorney

While a personal bankruptcy will remain on your credit report for seven to ten years and will make it more difficult to obtain credit, it is possible to get a small business loan after your bankruptcy.

To start, keep in mind that because the bankruptcy wiped out your unsecured debt and you cannot file for bankrupty again for a certain number of years, lenders may consider you to be less of a credit risk than you might think. However, you should anticipate having to shop around for loans, explaining what caused you to file bankruptcy, and demonstrating that your finances have changed and you are now a good credit risk.

Credit Score & History

Lenders review your and history to assess the risk you pose when you apply for a personal loan. If the bankruptcy still shows on your , a lender may decide to reject your application. Even if youre approved, its likely you wont secure the best interest rate. Lenders typically give the best rates to borrowers with good to excellent credit scores .

While youre in bankruptcy, you still can take steps to improve your credit score. For example, if you repay new credit on time, lower your credit usage, or get a , you can boost your score.

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Private Mortgage Insurance Versus Fha Mip

FHA home loans have one really significant disadvantage their mortgage insurance premium requirement. You have to pay 1.75% of your loan amount upfront, plus a monthly mortgage premium for the life of your loan.

In contrast, a conventional loan requires mortgage insurance only until you pay down your mortgage to 80% of your sales price. And there is no upfront premium. To avoid getting stuck with MIP forever, youll need to either wait until you can get a conventional mortgage or get an FHA loan and refinance it when you can meet the requirements of a conventional lender.

What Is Bankruptcy And How Does It Affect My Credit Score

How to Get a Loan After Bankruptcy?

When individuals, couples, or businesses find themselves in a position where they cannot meet their financial obligations, bankruptcy is a legal option that helps them manage their debt through federal court. Its an alternative to debt consolidation if you cannot afford monthly payments. Depending on your income, you might have a payment plan, or your debt might be discharged.

There are several types of bankruptcy, referred to as chapters:

  • Chapter 7: Liquidation bankruptcy requires the sale of your nonexempt property so funds can go to your creditors.
  • Chapter 9: This is for municipalities, like airports, hospitals, school districts, and utility districts.
  • Chapter 11: The most common chapter for businesses, this helps reorganize your corporate and small business debt.
  • Chapter 12: This is used exclusively for family farmers and fishermen.
  • Chapter 13: This allows individuals and couples to make payments on their debt for up to five years.
  • Chapter 15: Very uncommon, this chapter is for foreign debtors that are typically filing for bankruptcy in other countries.

The two types of bankruptcies that impact individuals and married couples are chapter 7 and chapter 13 bankruptcies. Occasionally, you might experience chapter 11 bankruptcy, though thats generally only for business owners that are liquidating.

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Chapter 7 Bankruptcy And Your Credit

Chapter 7 bankruptcy is the most common type in the U.S. Known as liquidation bankruptcy, you will have to sell your nonexempt property any additional vehicles or homes, liquid assets like cash in your bank account, heirlooms that have value. In many cases, chapter 7 bankruptcies result in no asset situations because people have already sold everything they can to get out of debt.

While this will help resolve debt in the most critical circumstances, it does have serious credit impacts. It will remain on your credit report for up to a decade. That means itll take at least ten years for you to have an excellent credit score again. During that time, youll have a hard time finding new credit options. Take advantage of secured credit cards and loans so you can start rebuilding your credit after bankruptcy.

Another consideration with chapter 7 bankruptcy is that you cant file again for eight years. If you find yourself in a serious bind in a few years, youll have limited recourse for getting out of debt.

Banks And Credit Unions

Depending on your bank or credit union, you may be able to apply for preapproval online or at your local branch. If you dont know which car you want to buy yet, the bank or credit union will give you a quote and letter of commitment to take to the dealership. They may even give you a blank check good for an amount up to your preapproval limit.

However, if you plan on buying a used car, many banks and credit unions have limits on the age or mileage of the vehicle.

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Dismissal Vs Discharge Of Your Bankruptcy Claim

When debtors declare bankruptcy, they are asking the Bankruptcy Court to take over their finances. The immediate impact of the declaration is that the court issues a temporary stay of collection activity. That means foreclosure or auto repossession efforts as well as phone calls and letters must stop while the case is being resolved.

In some cases, the court will dismiss Chapter 7 claims if it determines to repay creditors some or all of what they are owed. The determine the debtors income is sufficient, given the cost of living and average incomes in your area. If your bankruptcy declaration is dismissed, you end up back where you started.

If the court accepts a claim for relief, the Chapter 7 filing results in the liquidation of the debtors assets and the debts being discharged. That means, that the debtor is no longer a debtor and can begin with a fresh start and much worse credit. With a Chapter 13 bankruptcy, the discharge is usually granted 4 years after filing, as repayment plans typically last 3 5 years.

Looking For A Personal Loan After Bankruptcy

Can I Get a Loan after Filing for Chapter 7 Bankruptcy?

As you get ready to apply for a personal loan after bankruptcy, here are some of the steps to follow:

  • Check your credit reports: Get copies of your credit reports from and make sure the information is accurate. After a Chapter 7 bankruptcy, your debts should be included and show a zero balance. Double-check that your Chapter 13 debt accounts are being properly reported, now that youre paying as agreed.
  • Prove your income: As you apply, youll need to prove your income. Pay stubs, W-2s, and other documents can show that you have sufficient income for the loaneven though you have a bankruptcy. Try to include side-hustle or spousal income in the calculation, so lenders will view you as less risky.
  • Prepare an explanation: You can prepare a letter explaining the circumstances that led to the bankruptcy and how youre remedying the issue. If your bankruptcy was caused by medical costs or some other unforeseen issue, you might get a bit of a break.

Compare terms from a variety of lenders. Look online for the best personal loan providers and see what terms youre offered. You might not qualify for the best rates, but you might still get something affordable. Compare online offers with what might be available at your bank or a local credit union.

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Check Your Credit Reports

The first thing you should do is have a check through your credit records to make sure the bankruptcy now shows as being cleared. You can also regularly review your credit score to see how its improving before you apply.

Theres a number of websites that offer this as a fee-free service, such as Clearscore and Experian.

What Happens To My Mortgage If I File Chapter 7

Chapter 7 bankruptcy is known as total, straight, or liquidation bankruptcy. It is a wipeout of much of your outstanding debt under the guidance of a court-appointed bankruptcy trustee, who manages your assets in relation to your creditors. As part of a Chapter 7 Bankruptcy filing, the bankruptcy trustee may force you to sell, or liquidate, some of your property to pay back the debt you have accrued, and this may include your home under certain circumstances.

Does the property you may have to sell in a Chapter 7 Bankruptcy include your home in Texas? If you file and qualify for Chapter 7 Bankruptcy, you will likely have the choice of keeping your home, provided you continue to make your mortgage payments. However, if you want to abandon your home, you also have the choice of stopping your mortgage payments, and bankruptcy discharge of mortgage debt related to your home loan will occur at the end of the case, meaning you will not have to pay any more payments.

The lenders security interest in the property, however, remains in full force and effect, so the lender will be able to foreclose on your home if you stop making payments, once the bankruptcy is over. So, in short, the answer to can I include my mortgage in bankruptcy is a yes. Your personal obligation to pay the mortgage can be discharged, just remember that the lender can enforce their rights and retake your home.

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Special Circumstances That May Allow For Credit

Once you have filed for bankruptcy, you are not typically allowed to get approved for credit unless your situation involves a special circumstance. Several special circumstances in which the court may allow you to obtain new credit during bankruptcy include:

  • Medical Expenses Although you may not consider medical expenses as an incurring debt, they are a form of debt. When you visit a medical professional for services and receive a bill at a later time, the Bankruptcy Code considers this new credit.
  • A New Vehicle Its common for individuals to purchase a new vehicle during their Chapter 13 bankruptcies. While getting a loan from a conventional lender can be tough, lenders who cater to individuals making Chapter 13 payments do exist. If you get approved by one of these lenders, understand that you will be paying a high interest rate.
  • You may be able to get a new credit card during Chapter 13. If youd like to rebuild your credit, opening a secured credit card can help.

Although you typically need permission to incur additional debts during bankruptcy, small debts that are outlined by your Chapter 13 trustee, as well as any new tax liabilities that you incur, do not require the courts approval.

Personal Loans After Filing For Bankruptcy

Home Loans After Filing Bankruptcy MUST SEE!

If youre considering a personal loan after bankruptcy, its important to compare as many lenders as possible. This way, you can find the right loan for your situation.

The following Credible partners offer personal loans for bad credit, which means you might be eligible after bankruptcy depending on your credit.

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How Soon Will My Credit Score Recover After Filing For Bankruptcy

This depends on the steps you take following bankruptcy. If youre careful to maintain good credit habits such as paying all of your bills on time and keeping your debt balances as low as possible you could see an improvement in your credit score in the 12 to 18 months after you filed for bankruptcy.


For example, take it slow to apply for new credit so you can manage your balances without straining your budget.

If you decide to take out a personal loan after bankruptcy, remember to consider as many lenders as possible to find the right loan for you. Credible makes this easy you can compare your prequalified rates from multiple lenders in two minutes.

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