Can You Get Financing After Filing a Chapter 7 Bankruptcy for the Second Time?

Although bankruptcy filings have been on the rise these past few years, only a small percentage of people file for bankruptcy in the United States each year and fewer file for bankruptcy more than once. Most all filers experience a temporary loss of their credit scores after they have filed. As a result, many filers feel it is harder for them to get financing. That idea may have been what motivated this question from a debtor who posted it on a bankruptcy forum site in 2011, “Is it possible to get financing to purchase a house and a car after filing Chapter 7 bankruptcy for the second time?”

A Chapter 7 bankruptcy, commonly called liquidation of your assets, is normally the simplest and quickest form of bankruptcy. It is available to individuals, married couples, corporations, and partnerships. A trustee that is appointed by the court will gather and sell your non-exempt property, and he will use the proceeds from the sale in order to pay your creditors. Most Chapter 7 cases are “no-asset” cases, meaning you do not have any non-exempt property for the trustee to sell.

At the close of a Chapter 7 bankruptcy, all unsecured and non-exempt debts that were not satisfied by the liquidation process will be discharged. That means the debtor no longer has a legal obligation to pay the debts.

Credit bureaus, who pay public record vendors to collect bankruptcy information for them, can legally place the information on their credit reports for up to 10 years. Creditors, who subscribe to the credit reports, can use the information to reject potential borrowers who have filed for bankruptcy if they so choose. Not all creditors choose to reject borrowers who have filed for bankruptcy.

Generally, the Federal Housing Authority (FHA) cannot discriminate against you for filing bankruptcy. Their rules are that if you qualify, they will loan you money for buying a house after 24 months from the bankruptcy closing. You will be asked to make the same down payment and receive the same interest loans as anyone else qualifying for the loan. Qualifications for the loan require you to be employed and to buy a home with the payments a certain percentage of your gross monthly income.

Other home mortgage lending institutions have different rules for when they might lend to someone who has filed bankruptcy, and their qualifications for lending may also be slightly different than the FHA. These same lending institutions may discriminate against you for filing bankruptcy based on your credit rating. To get mortgage loans from these institutions may result in larger down payments and higher interest rates. On the other hand, there are some lending institutions today that may give a mortgage loan one day out of bankruptcy with no down payment.

Automobile loans are handled similarly to mortgage loans, but you are less likely to find a government backed loan for an automobile. You can get loans for cars, but you might expect to pay high interest with large down payments. There probably will not be any lending institution who will loan you money for a car without you having a steady income.

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