Getting A Home Loan and Car Loan After Bankruptcy

One of the main reasons that people avoid filing for bankruptcy is the fear that they will not be able to buy a house after bankruptcy or get a car loan after bankruptcy. The news circulating among friends and family is that bankruptcy will stop you from buying a home or getting a car loan. This could not be further from the truth. Yes, you may need some time after filing your bankruptcy to get approved, but No bankruptcy will not stop you from buying a home or a car in the next 10 years.

Although a Chapter 7 bankruptcy filing will be reported on your creditor report for the next 10 years and generally 7 years for Chapter 13 bankruptcy, this will not be the only item that creditors will utilize to evaluate whether to give you a mortgage loan or car loan after bankruptcy.

Getting A Home Loan After Bankruptcy

Most lenders recommend that you wait at least 2 years before applying for a mortgage loan after a bankruptcy discharge. During this time you can take steps to reestablish your credit and show the mortgage lending company that you are a good credit risk for them. You can obtain a mortgage loan prior to the 2 years, as long as your income shows that you can afford the payment, but a larger down payment may be required. If you are willing to wait at least 2 years from your bankruptcy discharge you may be in a good position to get a home loan after bankruptcy. A mortgage company will evaluate some of the following factors in determining whether to give you a home mortgage after bankruptcy:

• Income Verification- It doesn't matter if you have had a bankruptcy or not, if you don't have the income available to afford a home mortgage then no lender is going to give you a home loan. A mortgage company will need verification that you have sufficient income to be able to afford the monthly mortgage payment on the home loan.
• Credit Worthiness- Although the fact that you have filed a bankruptcy will be taken into consideration this is not the only factor that will be evaluated. If you have made your monthly credit payments on time, and have not defaulted on your payments for a period of 2 years, this will definitely help you in getting a home loan. If your debt is low then this should also add to your credibility.
• Down Payment - Whether you can obtain 100% financing will depend on a number of items. A lender may offset the fact that you are a larger credit risk because of your credit history by requiring a larger down payment.
  

Keep in mind that the more time that passes between your bankruptcy discharge and the application for a home mortgage, the less importance the bankruptcy filing will play. Also there are some special requirements for certain home loans. For example FHA will not approve you for a loan if three years have not passed since a previous home foreclosure.

Getting a Car Loan After Bankruptcy

A lot of people avoid filing for bankruptcy because their car may be in a bad condition and they will need to buy a car soon. You may believe that if you file for bankruptcy then there is no way you will be able to purchase a car. In fact, you may be able to purchase a car right after filing for bankruptcy, but it may not be with the best financing possible. If you are considering bankruptcy then more than likely your credit is already shot. You probably were not going to be able to get the best financing possible even before bankruptcy. If you are trying to get better financing for a car after bankruptcy then you will need sometime to reestablish your credit. Car Loan companies will generally look at:

• Credit Worthiness- Having at least 1 year of current payment history, with no defaults, will help you in obtaining better financing when buying a car after bankruptcy.
• Income Verification -Like a home mortgage, no lender will be willing to give you a car loan if you do not have the available income to afford the car loan.
  

You may think well what if I need a car right after bankruptcy then what are my choices. There are Bad Credit Car Loan companies that work with people who have a bad credit history including a bankruptcy. These companies may be able to approve you for an auto loan after bankruptcy. A few companies that I am aware of include

1. Auto Credit Express
2. AutoLoans.us
   

Another upside that you should keep in mind is that you are probably a better credit risk for a home loan or car loan company after bankruptcy than before. After filing for bankruptcy you have the ability to start rebuilding your credit and start reestablishing a positive history. Prior to filing for bankruptcy you may have carried a high amount of debt. A home loan or car loan company who may have looked at your debt prior to filing for bankruptcy would not have approved you for a loan. From their perspective if you cannot afford to pay your current creditors, why would you be able to pay them. After filing for bankruptcy, your discharged debt will not be a part of this equation, since you are no longer legally responsible for paying these debts.