Buying a Home After Bankruptcy


One of the big “bankruptcy myths” I always find myself having to dispel with potential clients, as well as members of the general public, is that “if you file for bankruptcy, your credit is ruined forever and you cannot do anything with regard to credit for at least 10 years”. Nothing can be further from the truth. At times, I feel like a lone messenger trying to get the truth out there so that people do not needlessly suffer in untenable financial situations due to misinformation.

I was therefore pleasantly surprised when David L. Parker, a mortgage banker with BMO Harris Bank, forwarded an article he wrote about “Life after Bankruptcy”. Based upon his article, I decided to interview David to get the real facts about getting a mortgage post-bankruptcy. Here are the highlights of that interview.

Mark: “Does someone have to wait 7 – 10 years before they would qualify for a mortgage after filing for bankruptcy?

David: “Absolutely not. Depending upon the circumstances surrounding the bankruptcy and the type of loan the borrower is applying for, they may be able to qualify for a mortgage as quickly as within 12 months after their discharge.”

Mark: “What are the circumstances that you as a lender look at in making a determination as to someone qualifying for a mortgage loan post-bankruptcy?”

David: “There are two general categories that we look at: extenuating circumstances and financial mismanagement. If there were extenuating circumstances surrounding a borrower’s bankruptcy such as medical issues, loss of a job or loss of a financial contributor to the household, time periods are generally shorter. Unfortunately, divorce is not considered an extenuating circumstance.

If the bankruptcy was due to financial mismanagement, then the waiting period may be longer. Financial mismanagement includes situations where an individual may have abused their credit by taking on more debt than they could afford, had a divorce or had a business failure. However, a business failure can also be considered an extenuating circumstance, for example, if you suffered losses due to the Gulf of Mexico Oil Spill.”

Mark: “What are the time periods for waiting for a conventional loan?”

David: “If there are extenuating circumstances, then both a Chapter 7 and a Chapter 13 require 24 months from the date of Discharge. If there was financial mismanagement, for a Chapter 7 there is a waiting period of 48 months from Discharge and for a Chapter 13 it is 24 months from Discharge.”

Mark: “How about if a potential borrower applies for an FHA loan?”

David: “If there are extenuating circumstances, after a Chapter 7 the waiting period is only 12 months after Discharge. There must also be evidence that there is not a likelihood of the extenuating circumstances to occur again. If it is financial mismanagement in a Chapter 7, then there is a minimum of 24 months from the date of Discharge. For a Chapter 13, if the borrower made their last 12 monthly payments to the Chapter 13 Trustee on time and the Trustee grants permission for the borrower to get a mortgage loan, a debtor in a Chapter 13 bankruptcy could purchase a home before they receive their Discharge under FHA guidelines.”

Mark: “Are there any other factors considered by lenders in providing a mortgage loan after a borrower has filed for Bankruptcy?”

David: “Yes, each mortgage lender may have additional requirements over and above the requirements I just discussed. For example, each lender may have a different credit score criteria and may have certain re-establish credit requirements to meet along with standard debt to income limits, loan to value ratios, and other standard practices.”

Mark: “So David, would it be safe to say that in a Chapter 7 if a Debtor does all the right things and filed due to extenuating circumstances, they could get a FHA mortgage loan in as little time as one year after receiving their Discharge?”

David: “Yes.”

Mark: “And even in a Chapter 7 with mismanagement, they can apply in 24 months after the date of their Discharge?”

David: “Yes.”

Mark: “Also, what I learned from our conversation is that they can even apply prior to getting a Chapter 13 Discharge which is an amazing fact that more people need to know about. Thank you David for sharing this very important and valuable information with my clients.”

For those of you have gone through bankruptcy or may be facing bankruptcy, I hope the foregoing information is helpful to you. If you would like more information about applying for a mortgage loan post-bankruptcy and would like to speak to David, he can be reached at: 941-556-5524 or e-mailed at:


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If you have a situation as we described in this article and have questions or concerns, please don’t hesitate to contact us to answer your bankruptcy legal questions.
Martella Law Firm
18501 Murdock Circle, Suite 304
Port Charlotte, FL 33948