Home ownership is the dream for people everywhere, however those who are in financial trouble may feel as though they’ll never reach that point. When you’re struggling to make the payments you already have, it can be difficult to obtain a loan in order to purchase a home, let alone save up enough money to actually make a down payment. Yet we find that many people who are in this situation don’t want to consider declaring bankruptcy because they don’t want to affect their ability to buy a home in the future. This fear often comes from a simple misunderstanding of how bankruptcy works and how it actually exists to help consumers, not hurt them. Let’s look at this in a little more detail to clarify some common misconceptions.
How Bankruptcy Impacts Your Credit
The most common misunderstanding that many people have is how declaring bankruptcy actually impacts your credit rating. Make no mistake, bankruptcy is a serious matter and you shouldn’t file for it without significant thought and careful consideration. However, many people often think bankruptcy is officially hitting rock bottom, leaving you with a scar on your financial standing that will never be erased.
This is actually far from true. Make no mistake, bankruptcy will impact your financial standing, but the effects are not permanent. At the most, bankruptcy declarations remain on your credit record for 10 years. However, in that time, you can make significant efforts to rebuild your credit to the point where you score is higher than it may have ever been, even with the bankruptcy in your history.
Credit reporting is fairly complex, but your score weighs recent history much heavier than previous actions. As Myrtle Beach bankruptcy lawyers, we often find that those who are really struggling under their financial debt have usually already taken a significant hit to their credit rating, and their score has already dropped pretty low, especially if they’ve been struggling for some time. For these people, declaring bankruptcy will have a much lesser impact than someone who carried a fairly good score before filing.
Recovering from Bankruptcy
In the immediate aftermath of declaring bankruptcy, life may be tricky, but you’ll notice an immediate improvement in your quality of life. For starters, the harassment and endless debt collection calls and pressure from creditors will finally come to an end, and you can start answering your phone again without worry. Repossession threats will come to an end, and you’ll have time to breathe and collect yourself. However, the work has only started.
Bankruptcy is a clean-slate of sorts when it comes to resolving your debts, but whether you fully take advantage of it is up to you. If you want to rebuild your credit, you should make a cohesive plan for getting back on track, including making your payments in full and on time when they come due. You may find that your credit card company might offer you a small, low-limit card that is backed by cash. If the deal seems right and there are no issues with the fine print, getting one of these cards can actually help you rebuild your score quicker. It might seem scary to open another line of credit after struggling with previous ones, but this is a great chance to build some good financial habits that you can carry with them for the rest of your life.
So long as you keep your payments current, you should start seeing a dramatic improvement in your credit score in as little as two to three years. At this point, you might find that you start qualifying for specialized mortgages that are federally insured. It’s important to consider these programs carefully before signing up, but you might be shocked to find out that home ownership has become an option again. After a few more years, your score will go up further, meaning you’ll likely receive even better loan terms.
So yes, you can buy a house after declaring bankruptcy, and it might be easier than you think. It’s just a matter of using your opportunity to rebuild your credit, staying diligent about your payments, setting goals, and then keeping those good monetary habits for the rest of your life.Is declaring bankruptcy the right choice for you? Call Lam Law Firm, LLC today at (843) 695-7700 to request a case evaluation and discuss your options with our Myrtle Beach bankruptcy lawyers!