Chapter 7 is one of the most common forms of bankruptcy because it discharges consumer debts, which is what most people are interested in.
Consumer debts would include things like:
- Credit Cards
- Car Loans
- Personal Loans
- Installment Loans
When consumer debt is discharged through bankruptcy, any responsibility you had to repay those debts is removed completely. However, secured debt has to be handled a little differently because it is backed up by real estate.
When secured debt like a mortgage is discharged through bankruptcy, the property still has to be sold off, usually through foreclosure or trustee sale. This affects how quickly you can apply for a new home loan. If you were only dealing with consumer debts then you could apply for a new loan two years from the date of your bankruptcy. But you have to wait for three years after a foreclosure to apply for a new loan. Most lenders refer to this waiting period as “seasoning time”.
To show your new lender that you put the seasoning time to good effect and convince them to give you a loan, you will need to:
- Explain what factors led up to your previous bankruptcy and foreclosure.
- Show that you have reestablished your credit and are keeping current on payments.
- Demonstrate an ability to manage your finances successfully.
- Provide the lender with an official document giving the date of the foreclosure sale or the trustee sale to show that the waiting period is over.
- If the property was listed in a bankruptcy, then it was probably sold as a foreclosure. The date of the foreclosure will be used to start the countdown until you can get a new loan.
- If the property was listed in a bankruptcy but was sold as a short sale, then the date of the short sale will be used to start the seasoning period.
Filing for bankruptcy is a great option when looking for debt relief. Let our attorneys guide you through your Chapter 7 bankruptcy, contact C. Golden & Associates now for a free bankruptcy consultation.