Many people avoid bankruptcy because they feel that their financial life after bankruptcy is over.  If we have learned anything over the last several months it is that there is definitely life for companies and individuals after bankruptcy.  A bankruptcy filing will appear on your credit rating.  However, just like delinquencies and slow pay entries, it can only last on your credit report for a statutory period of time.   Any negative reports on your credit history will affect your ability to get a home loan and the rate of you loan, whether it’s a history of slow pay or bankruptcy.  The question then becomes when are you looking to buy a new home?   As long as you continue to receive negative entries on your credit report and you continue to struggle with debt management issues, you will be shut out of purchasing a new home.  The sooner you start re-building your financial foundation, the sooner you will be able to obtain your homeownership goals.

Bankruptcy can actually be your first step in that reconstruction.  The first advantage is that you get your debt situation under control.  Depending on the type of bankruptcy you file and the type of debt obligations you have, your debts will either be discharged or paid through a structured payment plan.  The payment plans developed during the bankruptcy process are designed to fit within your financial resources.  This means that your credit history can begin improving with on-time payments, rather than a continued history of late payments.  Also during bankruptcy, you will be required to attend courses on financial management so that you exit the process empowered with better information on how to manage your finances.  The combination of these factors places you in a better position to begin accruing savings for the purchase of a home.  A stronger down payment will help you in qualifying for a better loan agreement.

Once you get through your debt crisis and accrue the savings for a down payment, the next step is to develop a plan.  A plan will help you prevent a relapse of credit problems.  Leverage the knowledge gained through bankruptcy including:

1. Don’t over indulge… buy what you need, not just the biggest house you think you can afford.
2. Research your market… know what’s a bargain and a bust.
3. Do your homework….know all the costs of purchasing and maintaining a home in your market. This includes taxes, homeowner’s fees, and insurance.

The quickest way back into a financial hole is to jump into a major financial obligation without a plan.  People often commit without understanding the full breath of the agreements they are signing.  Through bankruptcy and diligence, it is possible to obtain the dream of owning your own home.  Contact a qualified bankruptcy attorney to learn how bankruptcy can open the doors of homeownership for you.