Is it hard to get a mortgage after a bankruptcy?


Q. My daughter was out of work during the pandemic — thank god for unemployment — but she accumulated $20,000 of credit card debt. She still has a high credit score and she’s on her own financially now and working. With interest rates rising, it will take her a really long time to pay it all off. Is she better off filing for bankruptcy? She wants to buy a house in the next five years so she’s not sure what’s worse — taking forever to pay off this debt or trying to get a mortgage with a bankruptcy. Anything you can advise? Thank you.
— Trying to help

A. We’re glad to hear your daughter is back on her feet.

The question of whether someone who has file for bankruptcy can get a mortgage is a common one.

Typically, the answer is yes, said Karina Lucid, a bankruptcy attorney with Lucid Law in Bridgewater.

She said within two years of filing a Chapter 7 bankruptcy and getting relief from unsecured debt, the debtor typically has their credit sufficiently rehabilitated to qualify for a conventional mortgage.

However, there are a lot of nuances that go into that equation.

For example, we don’t know your daughter’s income, whether she has any other revolving lines of credit or debt, if she owns any real estate with or without a mortgage or if she owns or leases a vehicle.

Also in question is whether she’s paying her bills on time and whether she’s only making minimum or partial payments.

The answer really depends on all of these factors combined.

Lucid said filing a bankruptcy alone only causes temporary harm to the person’s credit score.

“As soon as you file your bankruptcy case, your credit score will see a 150 points negative hit,” she said. “However, in my experience, clients who do the right things to rehabilitate their credit — such as making their mortgage, rent or car payments on time, paying any existing loans in full before the end of the month — after their bankruptcy is discharged, will find that within two years of filing the bankruptcy case they are eligible for a conventional mortgage,” she said.

In fact, by the time your average Chapter 7 case is closed — approximately four months from the filing date — the majority of debtors have already seen that 150-point negative hit reversed and typically, most have a higher credit score within six months of filing their bankruptcy case than before their case was filed, Lucid said.

Your daughter may want to meet with a bankruptcy attorney to consider the details of her situation.

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This story was originally published on Aug. 19, 2022. presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.