Avoiding Bankruptcy: 3 Simple Solutions

avoiding bankruptcy when home buying

It might seem obvious, but avoiding bankruptcy when home buying is critical to loan approval and no long waiting period. Here’s what you need to know, including some simple solutions to avoid bankruptcy.

Filing Chapter 7 or Chapter 13

There’s a big difference between filing a Chapter 7 and Chapter 13 bankruptcy, which can impact your ability to get a mortgage loan. Chapter 7 requires selling assets to help repay outstanding debt while keeping some essentials such as your home and car, while the court discharges unsecured debt. Chapter 13 also allows you to keep your assets, however, it’s based on a repayment plan that requires completion in a court-determined number of years. Both result in being a high-risk borrower with challenges when obtaining a loan, but Chapter 7 is generally more of a liability for lenders.

Simple Solutions to Avoid Bankruptcy

If you want to buy a home, you’ll have a much easier time without bankruptcy on your records. Some tips for avoiding filing include:

  • Cut back on spending – Start by setting and sticking to a budget. Find ways to reduce non-essential spending, such as eating out, entertainment, and travel. Move to an all-cash system and stop using your credit cards. This is especially vital if you’re saving for a down payment while working to avoid bankruptcy.
  • Beef up your income – Finding a side hustle can make the difference between bankruptcy and financial recovery. A part-time bartender, deliver driver, or pet sitter job can supplement your income enough to help you chip away at your debt.
  • Consolidate your debt – Look into personal loans through your bank for debt consolidation, or consider a debt consolidation and company to help. Putting all your payments in one place can make a huge dent by reducing your overall interest.

Avoiding bankruptcy when home buying is possible. Don’t get discouraged if your financial situation is less than ideal. There are mortgage options for most situations, including loan options for someone who has filed for bankruptcy. To find out what you qualify for and for programs that can help, contact the experienced and compassionate team at Midland Mortgage Corporation.

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