How Long After BK To Buy A House (And Why)?

Exact Answer: After Two Years

Bankruptcy is a term used to refer to a condition in which individuals who cannot pay their debts and previous loans seek relief by giving some of their goods and entities and are not asked to pay all the debts. Judges mainly impose bankruptcy in a court order, and the debtor initiates other works.

Purchasing a house after the individual has filed a bankruptcy claim in question can be difficult. The credit score of the person suffers quite significantly. Thus, investing in a home after the bankruptcy proceeding is over can be arduous and may have to be delayed for a while.

How Long After BK To Buy A House?

Bankruptcy is one of the causes of the downfall of a person’s career or for a company. Suppose a company or an organization goes bankrupt. The company would typically have to shut down because it is in massive debt that it cannot manage its daily business. It is essential to manage finances properly, and you should invest the right amount at the right place. People often make mistakes when it comes to managing their finances, and thus they are left out with limited options when they face some monetary problems or issues in the future.

An individual may file for bankruptcy when he or she is unable to repay the creditors. When a person or organization is under the overwhelming pressure of repaying debt obligations to several different creditors, he or she may have to opt for the legal process of bankruptcy to discard some of this outstanding debt amount. In certain exceptional cases, this period can be reduced to twelve months. For instance, when the applicant can show the FHA that the bankruptcy was due to circumstances outside his or her control, like the death of a spouse.

Type Of BankruptcyTime To Buy A House
Chapter SevenFour Years
Chapter ThirteenTwo Years

The time after bankruptcy to buy a house depends on the type of bankruptcy. After a Chapter Seven bankruptcy, it takes four years to buy a house. In contrast, if the bankruptcy is a Chapter Thirteen one, two years is required to buy a house.

Why Dies It Take That Long After BK To Buy A House?

The financial standing of an individual is conspicuously lowered after he or she files a bankruptcy claim. The credit score of the individual is severely affected when he or she files for bankruptcy. Moreover, it is crucial to cognize that a bankruptcy claim remains a part of your financial history for seven years. After a bankruptcy claim is filed, the person in question becomes more of a credit liability. Such an individual has to work hard to rebuild a strong credit reputation to secure a home loan. Convincing the investors that the individual is an excellent financial bet takes time. After bankruptcy, the person must work to defeat this image of a credit liability.

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The time between the case being discharged and applying for a home loan is quite varied because each institution’s norms provide the loan to the individual. The FHA is a government department, but it secures loans from private lenders for individuals with less than perfect credit scores. However, the person must fulfill the requirements of these lenders.  

It takes that long after BK to buy a house because a person has no money left to invest in houses and other properties because of the debt. On the other hand, conventional loan sources have a shorter waiting period for those who can prove that the bankruptcy claim was filed due to reasons beyond their control.

Conclusion

On average, it can be concluded that buying a home is a formidable investment. Most people rely on mortgages to at least partially finance their dream homes. After a bankruptcy claim is filed, this process of securing mortgages for your home may become even more complex and lengthy.

On average, it takes a minimum of two years to buy a house after bankruptcy. For a Chapter seven bankruptcy claim, the individual must wait four years after the claim has been discharged by the court, while for a Chapter thirteen bankruptcy claim, the person must wait for two years. When securing mortgages from government banks, this waiting period is considerably shorter.

References

  1. https://www.jstor.org/stable/1599826
  2. https://www.jstor.org/stable/2326766