Renting or Buying a Home After Filing for Chapter 13 Bankruptcy
Once your Chapter 13 Bankruptcy has been filed, life can be difficult since that life still has to live somewhere. Regardless of whether or not you want to rent or own a home, your Chapter 13 filing will bring some unwanted baggage to the process of finding a living arrangement.
Fortunately, it’s not impossible. However, it does bring significant challenges, even with a bankruptcy attorney guiding the whole process. This entry is meant to help you find a new place to hang your hat and to hopefully help you with life after bankruptcy.
Where the Difficulties Come From
The primary reason Chapter 13 Bankruptcy filers have difficulty buying a home comes from the obvious: the reduction of your credit score. This is something that is going to be slow to repair, but it doesn’t put you out of the running.
Another possible issue is one that is social – the stigma of having a bankruptcy on your record. There will always be landlords or sellers that will be reluctant to work with someone with a history of bankruptcy. It’s within their right to deny an applicant based on bankruptcy, but even this is an obstacle you can overcome with a little planning.
The last obstacle is trickier though. In the case of an attempt to purchase a home, the time of your Chapter 13 Bankruptcy filing puts a temporary block on this. If you’re looking to buy, you’ll need to wait for twelve months unless there’s a special consideration in your filing to support your wishes to purchase real estate.
The last difficulty is the most personal though, and that’s how you feel about the bankruptcy. It’s important to throw the idea that bankruptcy makes you less of a person away. Many filers feel that they shouldn’t be trusted with a home or that their filing makes them lesser somehow.
You deserve to have a home. Remember that while you start to rebuild.
What Can You Do To Get Your New Home?
There’s plenty to do if you’re looking to get back in the rental or real estate game. The below are some of the more primary examples to keep in mind.
1. Use Your Words: Before you even start looking at homes or speaking with landlords and realtors, open up your word processor and get ready to write a letter. It’s best to have a pre-written statement to give to any prospective renter or realtor explaining the circumstances of your Chapter 13 Bankruptcy.
As has been said previously, sometimes a bankruptcy happens as the result of things you couldn’t possibly have controlled, such as a cancer diagnosis and a subsequent need for expensive treatments. Explaining everything should help to set some landlords or realtors at ease if you find yourself in the right set of circumstances.
2. Put Your Financial Ducks in a Row: Next, make sure to get all of your debts discharged or otherwise lined up, so you have an accurate picture of what debt remains and how much you still have. With luck, you may have only had credit card debts or unspecified loans. Real Estate debt will, unfortunately, have an effect, but it’s not a completely hopeless position.
Additionally, be sure to do everything in your power to improve things by carefully monitoring your credit (which can be done through Experian, TransUnion, and Equifax up to three times annually at no cost to you), to make sure the debts and assets you have are visible and valid.
3. Show You’re a Good Prospective Renter or Buyer Despite Your Bankruptcy: Once you’re in the process of working with a renter or seller, be sure to provide examples of your fitness to be a tenant or owner. You can do this by providing photos of your existing home so long as you’ve taken good care of it.
Additionally, you might try getting the message across that it’s not just you, but your family, that will be living in your new home. Family has always been good for credit and good faith when it comes to financial matters. You might even consider having your family along when meeting prospective sellers or renters.
4. Work With the Right People: Once you’ve worked things out with the party renting or selling the desired properties, your best option for finding a reasonable mortgage is to speak with the folks at the Federal Housing Administration. This does require evidence to support a few things pertaining to your Chapter 13 Bankruptcy, namely that you’ve been making your repayments fully, and on time; the Bankruptcy Court has written off on the purchase, and that twelve months have elapsed from the time of your Chapter 13 Bankruptcy filing date.
5. Consider Renting Over Owning Closely: In America, it’s always been said that the biggest part of the American Dream is owning your own home. While that sounds all well and good, after a Chapter 13 Bankruptcy, rental has a couple of great advantages.
Rental pricing, for one, can be cheaper than a mortgage payment, and after a Chapter Thirteen Bankruptcy, that is no small advantage. Tightening the belt for your monthly payment, rental or mortgage, is only going to assist you.
Additionally, buying a home comes with hidden costs. If you’ve ever had a water heater go bad, or have seen a septic tank back up, you know how unexpected problems incur not inconsiderable costs. When you rent, your landlord gets to do the replacing. This can keep the unexpected from coming back to haunt you later.
What To Do Once You’ve Got Your New Home
If you’ve done the things above, you’re not out of the woods yet; you’ll need to make sure a couple of things once your arrangement is signed.
1. Reputation is Everything, So Build It Up: All of the above does hinge on something very important, and this is your reputation. Many filers already feel that their reputation may be tarnished, but the important thing to remember is that your Chapter 13 Bankruptcy doesn’t make you any worse than anyone else. It doesn’t matter why you had to file. What matters is that you have a chance to start again. It’s why you filed for Bankruptcy in the first place. So you’ll need to ensure you’re doing everything you can to put your reputation (and your credit score) in order.
The best way to do this is to work with your bankruptcy lawyer toward an attainable payment plan that will be relatively easy to pay, then ensure you are paying it on time. This is possibly the most important aspect of rebuilding your financial reputation again. Avoiding the possible reasons your debts became more than you could handle before is important.
2. Save Up: It’s paramount to limit discretionary spending and to keep your eyes on the goal of making regular, steady payments on your debt. Try not to buy things that aren’t necessary, and don’t try to overpay either (there should be time for that later as your financial situation improves). Make sure you have enough money after everything is budgeted out to put aside what you need in case you experience a difficulty. Bankruptcy doesn’t prevent against loss of employment, illness, or acts of God. So having contingency funds is always a good idea.
3. Continue Regular Credit Checks: It’s not just for the times leading up to the rental. In the age of identity theft and online threats, even those with bankruptcy histories are not immune. There’s always a chance that there may be an outstanding debt remaining that should have been cleared or that events that seem unrelated to your credit have transpired to change your credit score. Continue to leverage your annual three free credit checks while you continue to save and rebuild your credit.
4. Keep Your Bankruptcy Lawyer On Speed Dial: Even once things are improving, you should still be ready for anything. Should another financial setback occur or should you find yourself with questions, experienced advice can help.
Cibik & Cataldo, P.C. have thirty-five years of bankruptcy experience and will help you find a path to financial security. Contact our dedicated legal team at (215)-735-1060 for a free consultation regarding your case.
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