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Steps to getting a mortgage after bankruptcy

Bankruptcy does not permanently prevent people in Massachusetts from getting a home mortgage. The passage of time and a diligent effort to rebuild credit could allow someone to finance a home purchase. As a general rule, people need to wait two to four years after bankruptcy before expecting a lender to even consider a mortgage application. The waiting period begins from the date of bankruptcy discharge or dismissal.

In the years following a bankruptcy, people can improve their credit ratings by paying regular bills on time and keeping a revolving credit account in good standing. Debtors should also monitor their credit reports and correct errors. When an individual with a record of bankruptcy applies for a mortgage, the lender will want a letter that details exactly what caused the bankruptcy. Lenders will be much more forgiving of financial hardships caused by a medical crisis or the death of a spouse than overspending on consumer goods and travel.

The type of bankruptcy action also matters to lenders. They look more favorably upon people who filed for Chapter 13 bankruptcy because that form requires repaying creditors through a payment plan approved by the bankruptcy court. Chapter 7 filers, however, may experience more difficulty obtaining a mortgage because that form simply erased their unsecured debts and did not involve paying creditors.

Someone struggling with unpaid bills will have to consider many variables before pursuing a bankruptcy action. An attorney knowledgeable about filing for Chapter 13 bankruptcy could review the person's financial situation and explain the pros and cons of going forward. If the person qualifies for bankruptcy protection, an attorney could organize financial records and prepare paperwork for the court.

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