Bankruptcy: No more past due bills. Now I’m ready to Buy a House

By
Real Estate Broker/Owner with Ace Home Realty DRE#01206592

Bankruptcy:  No more past due bills.  Now I’m ready to Buy a House
That may be true and it may not be true.   Before I tell you why, let’s briefly discuss the 2 types of bankruptcies an individual usually file, chapter 7 or chapter 13.

Debt
A chapter 7 bankruptcy is a process of liquidation that will discharge both personal and/or business debts when they cannot be paid.  This will give an individual a "fresh start" with no liability for any of the debts that weredischarged. However, a discharge is only available to individual debtors (also sole proprietorship), not to partnerships or corporations.

Bankrupt

A chapter 13 bankruptcy is a process in which an individual participates in the reorganization of his or her debts.  Basically, the debtor will make payments to the bankruptcy court that will make payments to the debtor’s creditors.  The debtor has between 3 to 5 years to complete their repayment plan and will receive a discharge upon completion of all payments.


Bankruptcy: No more past due bills.  Now I’m ready to buy a house.  Maybe and maybe not.  Yes and no.  It’s depends on where you’re at in the bankruptcy process, how much seasoning you have and your credit. 


Where are you in the bankruptcy process.  If your debts have not been discharged  or if you have not completed your reorganization payment plan, then you won’t be able to purchase a home.  However on the day you’re discharged of your debts or on the day you’ve completed your reorganization payment plan, you could buy a home.  Bankruptcy:  No more past due bills. Now I’m ready to buy a house,  but it won’t be cheap.   It’ll take cash or a hard money loan with a large down payment.


However the best way  to buy a home after bankruptcy is to reestablish credit as soon as possible.  You could apply for a Secured Credit Card or a Savings Secured Loan as long as they report your payment history to the credit bureaus.   Also make sure you pay each debt is paid as agreed or in a timely manner.  This will increase your FICO score and put you in a position to possibly purchase a home one year after bankruptcy.  Yes one year after bankruptcy.  As long as you qualify financially and meet the lender’s underwriting guidelines, you have a chance of buying  home.  So Bankruptcy:  No more past due bills.  Now I’m ready to buy a house.  Yes you are and Yes you can.

Hooray

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Sharon Sanchez, Broker-Owner of Ace Home Realty is a Short Sale Agent with the following specialized training designations:

  • Certified Distressed Property Expert (CDPE)
  • Certified Short Sale Professional (CSP)
  • Accredited Short Sale Designation (ASD)
  • Accredited Buyer Representative (ABR)
  • Graduate REALTOR® Institute (GRI)
  • REO Specialist Designation (RSD)

Serving Carson and surrounding South Bay communities along with  Bellflower, Cerritos, Compton, Gardena, Hawthorne, Inglewood,  Lakewood, Long Beach and Los Angeles.                              

 

Comments (14)

Rebecca Foresee
Alain Pinel Realtors - Morgan Hill, CA
Let's foresee the possibilities . and get results!

Hi Sharon, This is valuable information for people who've gone through bankruptcy as well as those thinking of it.  Thank you for sharing!

Jan 08, 2014 10:52 AM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Thank you Rebecca.

 

Jan 08, 2014 02:59 PM
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

GOOD MORNING SHARON .. is one type better over the other - and who decides which one can file for?!  Anyway, I believe  - once people get themselves out of debt and clear things up - then tend to jump right back in and create debt as soon as they can.  I think people in these situations should clear it up, and then work at being "stable" for a time after they are told they can buy, and then make that decision - instead of just buying as soon as they can! ( I know it's a little off the topic - but just a thought that came to mind after reading your post!)

Jan 13, 2014 08:02 PM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Hello Gabrielle - I think it's a matter of opinion as to which bankruptcy is best because each person's situation is different.  Once they speak with a bankruptcy attorney or paralegal, they'll have a better understanding of which way to go.  As far as stability, I totally agree.  It's better to work on ones financially stability before rushing out to buy again.

Jan 14, 2014 04:15 AM
Gabrielle Kamahele Rhind
KGC Properties LLC, Tucson Property Management & Real Estate - Tucson, AZ
Broker/Owner

Thanks for the response Sharon - I do not know that much about bankruptcy - but it makes sense to talk with an attorney - or at least someone skilled in the area. 

Jan 22, 2014 07:09 PM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Gabrielle, I just had an experience with a client that filed a bankruptcy with the help of a paralegal and the paralegal neglected to do something.  So an attorney that specializes in bankruptcies would be the way to go. 

Jan 23, 2014 03:37 AM
Evelyn Johnston
Friends & Neighbors Real Estate - Elkhart, IN
The People You Know, Like and Trust!

I believe if you filed bankruptcy on a FHA home then you have to wait 3 years to purchase another FHA financed home.  They just made that new rule that if you meet certain criteria that forced you to file bankruptcy but so far I don't know of any lender willing to waive the 3 year wait.

Jan 24, 2014 06:21 AM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Hi Evelyn.  I received an email from a lender last year that stated that you could buy 1 year after a bankruptcy if you reestablish credit and have the proper FICO score. Interesting.

Jan 25, 2014 03:13 AM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

It is  agood idea to reestablish credit as soon as possible. Thanks for the tips.

Feb 16, 2014 07:57 PM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

You're welcome Gita.

Feb 17, 2014 12:18 PM
Sharon Tara
Sharon Tara Transformations - Portsmouth, NH
New Hampshire Home Stager

God I just hope I never need this information, LOL!  

Feb 25, 2014 10:52 PM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

I agree.  By the way nice name, Sharon.

Feb 27, 2014 06:31 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Sharon - it is good for you to put this information out there.  Many buyers don't understand the rules and what you need to do after bankruptcy.

Mar 04, 2014 03:54 AM
Sharon Sanchez
Ace Home Realty - Carson, CA
Your Number "1" Source For Real Estate.

Thank you Grant.

Mar 05, 2014 02:39 AM