Bankruptcy offers a way out of debt for those struggling to meet their financial obligations, but it will impact your ability to qualify for new loans or credit cards. Many people believe that a bankruptcy filing will stay on their credit reports permanently, putting the dream of home ownership forever out of reach. However, with the help of an experienced bankruptcy attorney, you can begin rebuilding your credit and qualify for a mortgage within a few years.

Bankruptcy & Buying a Home

How Bankruptcy Affects Your Credit Score

While bankruptcy will have a negative effect on your credit score, the extent of the damage depends on your rating before filing. A borrower with a high FICO® score can expect a sudden, dramatic drop of several hundred points while those with poor credit may only see a modest decrease. Because mortgage lenders base their decisions partly on credit rating, filing for bankruptcy will likely make buying a house difficult in the short term.

Rebuilding Your Credit After Bankruptcy

Although filing for bankruptcy may seem harmful, a history of late payments and accounts in default is often worse in the long run. A bankruptcy attorney can help you discharge these debts, providing a new foundation upon which you can begin re-establishing your creditworthiness. Without the burden of excess debts, many borrowers are able to obtain auto financing and some credit cards within one year of filing.

Getting a Mortgage After Bankruptcy

Constantly struggling to keep up with debts and minimum payments usually leaves no room in your budget, which can make saving for a down payment impossible. Filing for bankruptcy will likely create more room in your monthly budget, freeing up funds to dedicate toward buying a house. While you may be charged a higher interest rate with a bankruptcy notation on your report, obtaining a mortgage and buying your own home is possible.

If you’re undergoing financial struggles and think bankruptcy could be your solution, seek guidance from  Greg Dunn, Bankruptcy and Debt Relief Attorney in Honolulu, HI. Since 1996, this bankruptcy attorney has helped over 12,000 borrowers throughout Hawaii get their second chance. He and his team will walk you through every step of the process until you’re back on steady financial ground once more. Visit their website to learn more about bankruptcy options, and call (808) 524-4529 to schedule an initial consultation with a bankruptcy attorney today.