Filing for bankruptcy is no easy decision to make. For many, there is a sense of failure or loss. For others, it can be a clean start and an opportunity to start over.

Let’s face it: financial education in this country is poor, and that’s putting it mildly! We learn by doing, and sometimes we get it wrong. Unless we are famous entertainers, world-class athletes, captains of industry, or the offspring of one of those people, financial crises are nothing new to us.

Fortunately, filing for protection under the bankruptcy laws is not a life sentence. People can and do recover financially despite filing more than one bankruptcy petition. However, the answer to the question about how long you must wait to purchase a new home after declaring bankruptcy depends on your financial history and the type of mortgage for which you have applied.

For ease of this discussion, we will assume that you satisfy all other requirements for a mortgage so our focus can turn to answering the question at hand. One thing all mortgage programs require is a set period of time from when you filed your bankruptcy petition to when you are applying for a mortgage. Mortgage companies call that length of time “seasoning.”

For an FHA mortgage, the length of time you must wait depends on whether you filed a Chapter 7 bankruptcy or a Chapter 13 bankruptcy. The waiting period for a Chapter 7 bankruptcy petitioner is two (2) years from the date of discharge before you can lawfully apply for a mortgage. The lending institution might require a more extended waiting period beyond the minimum required by law.

Chapter 13 Repayment

Chapter 13 repayment programs add a level of complexity to an FHA application. Chapter 13 bankruptcy rules permit you to apply for a mortgage during repayment as long as your payments are verified and you receive written permission from the bankruptcy trustee. You must have made consistent payments, meaning you have not missed one, for at least one (1) year.

Mortgages from the Veterans Administration (VA) are easier to obtain. Again, assuming all pre-requisites are satisfied, then you can apply for a mortgage from the VA after two (2) years from the date of discharge.

Conventional mortgages from a bank or mortgage company have longer waiting periods. If you have filed a Chapter 7 bankruptcy, then you must wait for four (4) years from the date of discharge before you apply for a mortgage. If you are in a Chapter 13 repayment plan, then you can apply two (2) years after the discharge date. Be aware, however, that if the Chapter 13 plan was dismissed rather than discharged, you must wait for four (4) years.

If you find yourself in this situation, contact our offices for a free consultation at (561) 838-9595

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