A lot of people wonder about their credit rating and whether they can obtain credit, including a mortgage, if they declare bankruptcy. You can obtain credit after a bankruptcy, including a mortgage, but it might not happen right away.
Credit rating
By the time most people make the decision to declare bankruptcy, their credit rating is already low because of missed payments. Credit scores generally begin to recover after the court provides a discharge of debts.
A Chapter 7 bankruptcy will remain on your credit report for 10 years. However, the accounts involved in the bankruptcy typically come off the credit report after seven years. A Baltimore bankruptcy attorney can provide more details.
Credit cards
There are some credit card companies that provide unsecured credit cards with small credit limits at a high interest to debtors whose bankruptcy discharge was received in the past six months.
Other lenders provide a secured credit card. This is a credit card where the debtor provides the credit card issuer with a small amount, usually a minimum of $300 or more, and the credit issuer provides a credit card in the same amount as the deposit. Most deposits are returned to the debtor after one or two years of on-time payments with a small amount of interest added to the money held in deposit.
Mortgages
Generally, it takes about two years after the court provides a discharge before a debtor can obtain a mortgage loan.
Some mortgage lenders, but not all lenders, will provide mortgage loans to people after two years from a bankruptcy discharge but the interest rate will not be the best.
The Federal Housing Authority (FHA) provides mortgages to borrowers who have declared bankruptcy if two years has passed since the bankruptcy was discharged and the interest rate is often better than the private borrowers willing to provide mortgages to those with impaired credit. In some instances, FHA will provide a mortgage loan to a borrower who has declared bankruptcy with a credit score of as low as 580. FHA loans are offered by FHA-approved mortgage brokers or FHA-approved bankers. FHA loans also have lower down payment requirements than other mortgage loans.
If you’ve declared bankruptcy and you want to buy a house and you belong to a credit union or can qualify for a credit union membership, then you should talk to a loan officer at the credit union. Credit unions and FHA-backed loans offer low interest rates to those with impaired credit, including those with a bankruptcy filing in their pasts.
The Law Office of Thomas J. Maronick is open during the pandemic and will continue to meet your Annapolis, Baltimore, Essex, Ocean City, Towson, White Marsh bankruptcy needs. A Baltimore bankruptcy attorney can help you to determine the best way to get out of debt and out from under creditor calls. An Ocean City bankruptcy attorney can devise a strategy for you that allows you to use the bankruptcy laws to your advantage. The consultation is free.
We can meet with you remotely if you have access to Zoom. You can contact Thomas Maronick on his cellphone at 202.288.0167, the law office at 410.885.1775 or through the website for a free consultation.