Even today, bankruptcy carries some stigma in New Jersey. However, debtors should understand that bankruptcy can actually be a great way of wiping their slate clean and starting to rebuild. That’s what it’s intended to do. And for most people, filing for bankruptcy does not mean you’ll never be able to buy a car or a home again. In fact, there are some advantages to filing Chapter 13 that can help you get back on the track to homeownership more quickly than you’d expect.
How you file matters
In Chapter 13 bankruptcy, people make a plan to pay back all or part of their debt to their creditors. Typically, this is known as a wage earner’s plan. The plan will last for up to five years. However, that doesn’t mean you’ll have to wait that long to apply for a new mortgage.
Lenders like the initiative of people who file for Chapter 13. Their commitment to making good on their debts is reassuring to lending institutions. Because of this, some mortgage lenders will consider people with Chapter 13 bankruptcy on their records within a year of the filing.
Chapter 7, another common form of personal bankruptcy, involves liquidation. There’s no repayment plan. This is a bigger red flag for financial institutions. Applicants with a Chapter 7 bankruptcy in their credit report can expect to wait about 2 or 3 years before being considered for a home loan.
As you can see, the way you approach bankruptcy will impact the way you come out of it. Before you file, it’s a good idea to seek professional advice so that you can understand what the nuances of your filing will mean for your financial picture in the long run.