Years ago, when I filed bankruptcy, the thought that I might not be able to own my own home because of my past bankruptcy never even occurred to me. Now that I am older and a little bit wiser I understand what an impact bankruptcy has on your credit and overall purchase power. In my case I was fortunate that by the time I even thought of trying to buy my own house the bankruptcy was discharged and I had credit worthy cosigners willing and able to help me should I need it. However, not everyone is as lucky as I am.
A couple of years ago a close friend of mine began considering filing for bankruptcy. She was working for a bankruptcy attorney when her debt situation began getting out of hand and it was he who suggested she consider bankruptcy and offered to help her file at no charge. Prior to the offer she hadn’t considered bankruptcy as an alternative to her debt situation but once the proposal was made she had to seriously consider it and what impact it would have on her dreams of home ownership. My friend isn’t the only person who has been faced with this difficult decision and she soon found that bankruptcy isn’t the end of the world nor does it destroy ones chance of owning a home.
For her bankruptcy would wipe the slate clean so to speak giving her a fresh credit start. It would provide her with immediate relief from her debt (which was primarily credit card related) and allow her to start saving up in earnest for a down payment. Because one of the first things lenders do when qualifying a potential home owner for a mortgage is go over their credit report with a fine tooth comb the attorney explained to her that once the bankruptcy was filed she would still need to monitor her credit reports to make sure everything was being reported accurately.
Also she was encouraged to reestablish her credit with a low balance credit card or two. Getting one or two credit cards with $200 or $300 balances and then being sure they were paid on time all of the time would show that she is learning how to manage her credit properly. The one major consequence of filing bankruptcy in her case would be paying a higher interest rate on her mortgage.
Now, a year after filing bankruptcy, my friend is on her way to home ownership a year ahead of schedule. After her bankruptcy was filed her delinquent credit card debt was removed from her credit report and she was able to start over by getting to, very low balance, credit cards which she used to reestablish her credit. No longer drowning in debt she was able to save a substantial amount of money for a down payment and found a local lender with a wonderful reputation to help her obtain a mortgage.
