When you find yourself struggling with your finances, one of the options you may consider is bankruptcy. Bankruptcy can be an excellent choice, depending on your circumstances. If you can’t repay what you owe and are having a hard time making ends meet, then it may be the right choice for you.
There are two main types of consumer bankruptcy. These include Chapter 7 and 13. Chapter 7 is a form of liquidation bankruptcy, while Chapter 13 allows you to repay at least a portion of what you owe on a repayment plan.
After selecting either of these, you will notice a hit to your credit score. You may also find it harder to take out loans or to get credit to make large purchases, such as if you want to buy a home.
That doesn’t mean you can’t buy a new home after bankruptcy, though. In fact, you may be able to very shortly after emerging from bankruptcy.
Buying a house after Chapter 7 bankruptcy
After Chapter 7 bankruptcy, you may be able to buy a home in as little as two years. Both VA and FHA loans require you to wait around two years, while USDA loans require a three-year wait.
Buying a house after Chapter 13 bankruptcy
For Chapter 13 bankruptcy, you may have more leniency. For USDA loans, you can apply as soon as a year following the bankruptcy. For VA or FHA loans, you can apply right away.
In both of these cases, government-backed loans give you the best option for getting a home loan sooner. If you would like a traditional loan, then you may need to wait longer. Usually, if you intend to buy in the near future, a Chapter 13 bankruptcy is a better option, since you do repay more of what you owe and see less damage to your credit score.
If you’re interested in buying a home following bankruptcy, it is possible. For now, if you’re struggling with money, do what you need to do to get that debt taken care of. A bankruptcy may help you rebalance your finances and move forward with better financial security.