Many Americans have avoided filing bankruptcy at all costs because of the misconception that they will never be able to buy a house after the discharge. While a bankruptcy filing does put a big scarlet B. on one's credit report, it doesn't mean that they will never be able to buy a home. After what happened in 2007 with the real estate bubble bursting, it has become much harder to qualify for a mortgage. The federal government has added much stricter guidelines for Fannie and Freddie making it much harder for a person to get a loan. It doesn't mean that it's impossible though.
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The first thing a person needs to do after filing for bankruptcy is to start reestablishing their credit. Initially, right after the bankruptcy discharge, some credit will be available but it will be costly. In my opinion, this is the time to enjoy being debt-free and not get caught up with credit card debt or any other debt for that matter. The stress that was caused from being buried under a mountain of debt should be remembered and not forgotten. This is part of a learning curve and for someone that doesn't learn, they will be doomed to repeat their mistakes over and over.
When credit becomes available, the individual should be very cautious and not put themselves in debt beyond what they can pay. It's a good idea to get a credit card with a small limit and charge on it. Don't tap it out, but keep a running balance so the person can show a payment history. Pay it down and charge it up, then repeat the process and the limit will increase. Part of a person's credit score is their debt ratios and if their credit limit is high and their balances are low, they will have a higher credit score.
Another good way to develop credit is to purchase an automobile. Usually, car dealers have programs for individuals that had to file for bankruptcy. The downside is for someone that hasn't rebuilt any kind of credit, the interest rate will be rather high. It would be better to develop a payment history before attempting to make a larger purchase like this. A short time after filing bankruptcy with diligence and common sense, a car loan isn't far off. Buying a car is usually easier than getting any kind of unsecured credit because the automobile is the security. If the person puts down a chunk for the down payment, they usually can get a lower interest rate and be approved much easier.
Spending some time working on repairing and building one's credit is invaluable after filing for bankruptcy. After two or three years a person that has shown a complete turnaround in their financial life might be a candidate for a home mortgage. This is of course based on the person's ability to afford the payment. If the person makes a decent wage and has saved up some money for a down payment, there are programs that will put these people into home loans. There are first time buyer programs and even FHA programs for individuals that fit this model.
Creditors are opportunists and know that Americans exiting a bankruptcy are many times a good risk after the bankruptcy discharge. Many people leaving a Chapter 7 bankruptcy that had a problem with credit card debt might be debt free or close to it. As long as they're working and make a decent income, creditors see these individuals as future customers. This is where a person really needs to be careful and when in doubt they should consult their bankruptcy attorney before signing on the line. Sometimes, a bankruptcy attorney will set their client down and give them the do's and don'ts post bankruptcy filing. All people need to do is listen to their advice.
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