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Renting or buying a home after Chapter 13 bankruptcy

Kentucky residents who have considered Chapter 13 bankruptcy as a means to restructure their obligations may be concerned about the implications of filing . Although bankruptcy does have an impact on a filer's credit rating, it is possible to rent or buy a home after filing.

Chapter 13 differs from the more common Chapter 7 in a significant way. Under Chapter 13, liquidation of assets is not necessary because no debt is immediately discharged. Instead, a payment plan is created that will continue for a period of three or five years. The payment plan allows a debtor to make affordable monthly payments. At the end of the repayment period, if all payments have been made in full and on time, much of the remaining unsecured debt is discharged.

Both types of bankruptcies have a negative impact on the person's credit report. Getting credit or purchasing a home is not impossible during bankruptcy, but it could be difficult. People who have filed under Chapter 13 could take certain steps to increase their chances of being approved for a home rental or a mortgage. For example, writing a letter to a potential landlord or lender that explains the reasons for the bankruptcy could help. Letters of recommendation from professional associates, an employer or respected community members could be sent as well.

Obtaining a mortgage while in Chapter 13 is possible through the Federal Housing Administration. Borrowers must have written permission from the bankruptcy court to obtain a mortgage, and they must have been making on-time payments for at least one year of the bankruptcy repayment plan.

Both types of personal bankruptcy share one important thing in common. Upon filing, all phone calls and other debt collection efforts are legally barred. This is how bankruptcy can give someone immediate relief from debt collectors.

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