One common misconception causes debtors who could really benefit from bankruptcy relief to delay or shun filing for Chapter 7.

Many consumers mistakenly believe that filing for bankruptcy precludes their ever qualifying again for a mortgage. While it’s true that bankruptcy proceedings can make your plans to purchase a home simmer on the back burner for awhile, if you use that time wisely and pay all of your bills on time each month, you will improve your credit score and be ever closer to your dreams of owning your own home.

What are the waiting periods for a loan?

If you plan to use government-funded loans to purchase a home, below are the typical waiting periods for home buyers who have filed for bankruptcy:

  • VA home loans- two years
  • FHA loans- two years
  • USDA home loans- three years
  • Fannie Mae/Freddie Mac mortgages- four years, or two years if extenuating circumstances existed

Extenuating circumstances might be a one-time occurrence or a series of mishaps that made it impossible for a debtor to continue meeting their financial obligations, e.g., a natural disaster, major illness or serious accident, job loss, etc.

Using your time wisely

In the interim period between your bankruptcy discharge and your application for a mortgage, you should be working hard to re-establish your credit and have no serious derogatory marks since filing for bankruptcy.

What if my home was foreclosed upon?

Foreclosures typically affect consumers’ ability to qualify for a loan for seven years. But if your bankruptcy also included the home foreclosure, you may be able to significantly shorten that time.

Here, timing is everything, so check with the Monmouth County Clerk of Court to verify the date of the foreclosure completion. If your foreclosure date was before you filed for bankruptcy, your waiting period begins on the day that your bankruptcy was discharged.

When the sequence of events is reversed and the foreclosure took place after your bankruptcy got discharged, the waiting period my be a bit longer dependent upon the type of loan that you seek.

Get it right the first time

The laws governing bankruptcy proceedings are quite complex, which is why it is always prudent to seek the advice of a New Jersey bankruptcy law attorney before filing.