Bankruptcy and Home Ownership

[ferco]

A couple completed bankruptcy proceedings last year. The home they're currently renting is up for sale. How can they purchase the home. Are there any legal impediments. They are currently in their 70's.

[brewer12345]

Nope , no legal impediments. Some banks like to lend to the recently bankrupt because they know you can't file for several years, no matter what happens. Probably ain't gonna be cheap money, though.

[lets-retire]

There are several different lenders out there who will lend to them. If they filed chapter 13 and are still making payments, they will need to obtain permission from their trustee, otherwise it is possible.

I obtained a mortgage after paying off my chapter 13 with nothing more than a note from the trustee stating I had made all of the payments as required in the case. Many more lenders would have made the loan only if I had permission from the trustee or the discharge papers.

[ferco]

They filed chapter 7; Perhaps Martha or one of the other attorneys on the board can help with this question.

[lets-retire]

The main thing is the lenders' requirments. Unless your friends have established some kind of credit their credit score will be very low and many products will either not be available or as brewer said they will be very expensive. According to the attorney I had, once the case is settled it's settled the court doesn't want anything more to do with you.

[Martha]

Once they receive a discharge in their bankruptcy, as lets-retire says, there will be no more court involvement or trustee involvement in any borrowing decisions. A lender will want to have a copy of the discharge papers.

The only remaining issues are credit issues. My experience, which is now dated by several years, was that most lenders would finance a home purchase 2 years after a discharge provided that post bankruptcy credit was good. However, subprime lenders and local lenders with a relationship with the debtors may be willing to make a loan right away but at a higher cost.

As Brewer said, the one good thing about chapter 7 bankruptcy is that you no longer owe money, so some lenders are actually anxious to lend to you. Especially because you can't file a chapter 7 again for 6 years. Post bankruptcy credit card solicitations are common. However, it is generally harder to get a loan to buy a house.