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How long before a new FHA loan with Chapter 7 bankruptcy?

Today's economic environment is filled with uncertainty. Individuals throughout Kentucky are concerned about losing their jobs and whether they will be able to find a new job if necessary. In addition, many face mounting debt as the result of a job loss or medical condition. All of this adds up to increasing financial problems for which many discover that Chapter 7 bankruptcy is the solution.

With Chapter 7 bankruptcy, the individual is generally able to have the majority of his or her debts discharged. While there are a few types of debts that may not be discharged, the majority are eligible. As a part of the process, though, certain assets are generally included and turned over to the bankruptcy trustee. These assets are then sold to alleviate some of the debt.

In some cases, a home is included in this sale. Although it is possible that the home could be removed from the bankruptcy, in some instances, it is in the individual's best interest for it to be included and that debt burden be removed. However, some have expressed concern over how long of a waiting period will be required before they would be eligible for an FHA mortgage to be able to purchase another home.

Current FHA requirements state that there is a minimum two-year waiting period between the time when the Chapter 7 bankruptcy is discharged and when the Kentucky borrower can once again purchase a home using an FHA loan. For many, this is good news due to the fact that they have a fairly short period of time in which to recover financially, and then they are able to qualify for a new home loan. Individuals interested in pursuing financial relief through Chapter 7 bankruptcy will want to discuss their particular situation with legal counsel.

Source: fha.com, "FHA Loan Rules for Borrowers After Filing Bankruptcy", Feb. 18, 2017

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