Debt can complicate dreams of buying a home. When adults are busy scrambling to make ends meet or juggling which bills to pay and which to put off, saving for a down payment can feel impossible. Even though bankruptcy could help address that type of debt, many people in Connecticut still do not take advantage of the process. This is partly due to the fear that bankruptcy will prevent them from buying a house in the future.
Having a bankruptcy on a credit report can seem like an impossible barrier to get past. However, once people have their debts discharged through either Chapter 7 or Chapter 13 bankruptcy, getting their finances on track is generally much easier. Most people even rebuild their credit despite having bankruptcy showing up on their credit reports.
Chapter 7 bankruptcies stay on credit reports for a decade after filing, but individuals only need to wait four years before applying for a conventional mortgage. Those applying for government-backed loans only have to wait two to three years. Depending on how well a person has rebuilt his or her credit, it may be relatively easy to obtain a loan after the initial waiting period.
It is true that filing for bankruptcy will affect a person's credit score, but so will taking on large debts and missing payments. Rather than struggling for years or even decades, some Connecticut residents might fare better both financially and in regard to their credit score by pursuing bankruptcy in a timely manner. This can give individuals the opportunity to focus on their financial stability while also rebuilding their credit, and preparing to buy a home.