Hafemeyer Law

Home Ownership After Bankruptcy

Home ownership is the dream of many individuals. For those who have filed bankruptcy this dream may appear to be too difficult to obtain.  However, the reality may be that home ownership following bankruptcy is not out of reach.

Bankruptcy laws in this country were written to help individuals get a fresh start: to assist them by helping them get out from under debt and allow them to plan for their future. Debts that are discharged in bankruptcy are usually no longer collectible, meaning debtors can breathe a sigh of relief and move forward without the harassment of past creditors.

When most individuals begin the journey of home ownership, applying for a loan is typically part of the process. Banks approve homeowners on the basis of their credit worthiness, which is typically measured in their credit score. Credit scores are used by most creditors to determine if an individual is likely to repay a debt.

Low interest rate loans are often given to those borrowers with the highest credit scores. A low credit score can often mean a higher interest rate. In these cases, borrowers can request a family member co-sign the loan, increase the amount of the down payment, or buy a house with a lower purchase price in order to obtain the dream of home ownership while continuing to build credit worthiness.

Following a Chapter 7, Chapter 11, or Chapter 13 discharge, it is recommended that individuals begin applying for credit to reestablish a good credit history. Opening a credit card with a small limit, using the card once a month and then paying the balance off at the end of each month is a good way to start to rebuild credit. Also, paying utilities and other monthly bills on time each and every month shows creditors that an individual is credit worthy.

Working to reestablish and build credit following a bankruptcy discharge should be done with care. If you would like to discuss bankruptcy or other legal matters surrounding a bankruptcy please contact me at 507.384-3215.

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