We’ve all heard about people who have filed for a bankruptcy, or even gone through the process ourselves. Whether it is student debt, stress from mortgage payments, or credit card debt – bankruptcy has been often viewed as a way out of a desperate situation. But for those of you who are currently considering this option or if you just want to know more about this topic, here are 20 things you might not have known about bankruptcies.
- There are two types of bankruptcies: Chapter 7 and Chapter 13.
- Chapter 7 is total bankruptcy. This means all of your assets that are not exempt are liquidated.
- Chapter 13 is more commonly used by people who don’t want to lose their assets, and are willing to pay a portion of their debts.
- Interest rates for a mortgage are much higher once you have filed for bankruptcy.
- Once you file bankruptcy, you can’t do so again for another 7 years.
- Many lenders will let you borrow just 6 months after a bankruptcy, but you must have a 20-35% down payment available.
- For better rates on your mortgage, you would have to wait a minimum of 4 years for a conforming loan.
- Chapter 7 bankruptcies stay on your credit record for 10 years.
- Chapter 13 bankruptcies are on your credit record for 7 years.
- It may be helpful to get a credit card after you file bankruptcy to build back your credit (of course with good budgeting skills).
- Credit card companies are generally willing to issue a credit card because they know you have no debt and can’t file again for 7 years.
- Chapter 13 is considered reorganization, as you will repay part or all of your debts, but you need more flexibility with repayment.
- Chapter 7 is when you wipe out the debts you owe, also called liquidation.
- Depending on your income, you may not be able to file for Chapter 7 bankruptcy.
- Chapter 13 may allow you to still keep your house by repaying your missed payments on your mortgage.
- Keep in mind that many credit situations including refinancing is going to be very difficult if you have a bankruptcy on your record.
- If you’re struggling to make payments, talk to your lender and credit card company first, they may be willing to work with you on late payments.
- A bankruptcy is detrimental to your credit score. If you want to improve your score, but are unsure how to do it, check out Fresh Start.
- If you’re looking for a home after bankruptcy, keep in mind that this is still possible. However, lenders do generally prefer to see a couple years of good payment history and steady flow of income.
- Look into FHA loans for home buying after a bankruptcy as they have lower credit requirements than traditional loans.
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