Can You Buy a Home in New Jersey If You File for Bankruptcy?
Filing for bankruptcy can be a stressful experience, though it is sometimes necessary to relieve or deal with certain forms of debt and move on with your life. And while filing for bankruptcy can liberate people from certain debts, it can also have some negative financial consequences, such as a lower credit score. People who declare bankruptcy may have questions about the home-buying process, such as: Will filing for bankruptcy impact my ability to buy a home in New Jersey? The answer is yes, though they should be aware that there are some considerations that need to be made. Continue reading for more information about your ability to buy a home in New Jersey after declaring bankruptcy and how the New Jersey bankruptcy lawyers from Young, Marr, Mallis & Associates can provide assistance.
How a New Jersey Bankruptcy Discharge Impacts You Buying a Home
People who have declared bankruptcy but are still interested in purchasing a home should note that they will not be able to buy a home until they have been discharged from their bankruptcy. When discharge occurs, the debtor will be released from the debts that are dischargeable. After the debtor has been discharged, the creditor is no longer able to initiate or continue legal actions against the person who has declared bankruptcy.
With a Chapter 7 bankruptcy, a debtor will usually have to wait between three and four months to be discharged. However, if the case is complex, they may have to wait longer. Chapter 7 bankruptcy is available only to individuals; it is not available to partnerships or corporations. There are some debts, it should be noted, that cannot be discharged during a Chapter 7 bankruptcy. These include child support, alimony, penalties and fines resulting from criminal activity, taxes, court costs, property liens, and others.
With a Chapter 13 bankruptcy, the debtor is discharged after all of the payments in their plan have been made. In certain cases, the debtor may be able to ask the court to grant them a hardship discharge. This will only be granted if the debtor cannot complete their payment plan due to circumstances that are not their fault and out of their control; also, the creditor must have already received at least as much in monthly payments as they would in a Chapter 7 bankruptcy liquidation case. Debts that cannot be discharged during a Chapter 13 bankruptcy are largely the same as those that cannot be discharged in a Chapter 7 bankruptcy.
Rebuilding Good Credit After Filing for Bankruptcy
Declaring bankruptcy can severely damage debtors’ credit scores. However, having a healthy credit score is a vital part of successfully buying a home. Mortgage lenders give better interest rates to borrowers that have higher credit scores, and they may even deny loans to creditors whose credit scores are too low. It’s important for people that are seeking to buy a home to do whatever they can to reestablish credit after a bankruptcy.
After declaring bankruptcy, people interested in buying a home can work to rebuild their credit in a few ways. Firstly, they can continue to make payments on debts that were not discharged in the bankruptcy. It is possible to rebuild one’s score by securing new forms of credit, which can be done by getting new credit cards and then making small purchases that are paid in full and on time. Making on-time and consistent payments on credit over an extended length of time will eventually raise credit scores.
Getting a Loan for a Home After Declaring Bankruptcy in NJ
Bankruptcy stays on a credit report long after debts are discharged, but this doesn’t mean that its presence will necessarily prevent people from getting a loan. The record of a Chapter 7 bankruptcy will remain on a credit report for 10 years, and a Chapter 13 bankruptcy will remain on a credit report for 7 years. However, it is still possible to be issued a home loan with the record of a bankruptcy on a credit report.
Usually, people who are interested in buying a home will have to wait two years to get an FHA loan after declaring bankruptcy. There are certain circumstances that allow potential homeowners to be issued an FHA loan in less time following a Chapter 7 bankruptcy; they may be able to obtain a loan in as little as one year.
In order to receive an FHA loan less than two years after a Chapter 7 bankruptcy, people that are interested in buying a home will have to prove several things. Debtors interested in securing a home loan will have to show that their bankruptcy was caused by circumstances that were beyond their control. This may be a medical emergency that resulted in major debt or a temporary job loss.
Debtors interested in buying a home will also have to show that their income was reduced by at least 20% for six months or more and that the circumstances leading to the bankruptcy do not have a good chance of occurring again.
The process is slightly different for people that have declared Chapter 13 bankruptcy and would still like to get a loan for a home. A person that has filed for Chapter 13 will need to produce proof that they have made payments in accordance with their payment plan for at least one year. Also, the debtor must obtain court approval to get an FHA mortgage.
Bankruptcy Attorneys Serving New Jersey Residents
If you are considering filing for bankruptcy in New Jersey but are concerned about whether or not you will be able to buy a home at a later date, you should get in touch with the New Jersey bankruptcy attorneys from Young, Marr, Mallis & Associates. The attorneys at Young, Marr, Mallis & Associates have decades of experience dealing with Chapter 7 and Chapter 13 cases. To schedule a free and confidential consultation, contact Burlington County, NJ bankruptcy attorneys Young, Marr, Mallis & Associates at your earliest convenience. Call 215-639-5297 today.