How soon after a bankruptcy filing can you buy a house?

If you are dealing with significant debt and contemplating bankruptcy, you may be put off by the potential damage that a personal bankruptcy filing could do to your credit score. The common belief among debtors in Atlanta and throughout the country is that a Chapter 7 or Chapter 13 bankruptcy causes significant and lasting damage to your credit rating, to the point that you will be unable to buy a home or take out a loan for up to a decade.

However, this is generally not the case. In fact, homeowners may be able to obtain a new mortgage or refinance an existing home loan in as little as one year after exiting the bankruptcy process, depending on the circumstances or their bankruptcy case and its resolution.

Specifically, mortgages that are guaranteed by the Federal Housing Administration are allowed one year after a potential buyer exists the Chapter 13 bankruptcy reorganization process, and two years after an exit from a Chapter 7 liquidation. The waiting period for Chapter 13 is generally shorter because it includes a partial repayment of the filer’s debts, which lenders see as more responsible.

Fannie Mae and Freddie Mac guidelines are slightly longer, requiring a waiting period of two to four years. But even this timeline is significantly shorter than most people believe.

Certainly, it is not just the passage of that waiting period that will dictate whether a person who files for bankruptcy will be eligible for a mortgage. The filer must also demonstrate that they can manage their credit responsibly by paying their bills on time, and possibly by taking out and making timely payments on a new secured credit card.

Source: New York Times, “Life After Bankruptcy,” Vickie Elmer, September 13, 2012