Florida residents who are considering filing for bankruptcy should know that bankruptcy can help to wipe out debts so that they can move on from overwhelming debt. Many might be concerned that it will be then impossible to obtain a mortgage or refinance an existing home. This belief stems from the fact that a notice of a bankruptcy filing will stay on one’s credit report for seven to 10 years.
However, homeowners or those who would like to own a home but who have filed for bankruptcy may be eligible to receive a mortgage by the Federal Housing Administration in as little as one year after a Chapter 13 bankruptcy reorganization in which debts are partially repaid, and two years after a Chapter 7 liquidation. More conventional mortgages from Fannie Mae and Freddie Mac still suggest a two-to-four year waiting period, but this is still much less than what one would assume.
In order to get approved for a mortgage or a refinancing in as little time as possible, it will be important for consumers post-bankruptcy to re-establish credit. This is necessary in order to prove to lenders that individual can manage debt responsibly.
It is important to recognize here that many Florida residents who decide to file for bankruptcy do so because of overwhelming debt that had been accumulated before the nationwide recession took place, and when most people were hopeful about the future. Many of these individuals were not necessarily irresponsible with their debt, but were instead taken by surprise by the abrupt change in the economy.
There may be other legitimate reasons that can lead to a decision to file for bankruptcy protection. These might include the death of a spouse, divorce or illness. Any of these scenarios can tend to decrease the wait time for obtaining a mortgage because these situations are not indications that the person was irresponsible with their debt.
Source: The New York Times, “Life After Bankruptcy,” Vickie Elmer, Sept. 13, 2012