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Chapter 7 bankruptcy and home ownership

The idea of owning a home is part of the American dream. This dream holds true for many throughout Kentucky, and the possibility of this dream being diminished often stops individuals from taking the steps necessary to protect their financial future. Many fear that filing for Chapter 7 bankruptcy will prevent them from home ownership; however, this is far from the truth in many cases.

It is true that bankruptcy will have a negative impact upon one's credit score. However, by the time that an individual typically files for bankruptcy, the mounting debts and late payments are already having that negative effect. While filing for bankruptcy will remain as a part of the credit report for ten years, it also gives the individual the breathing room necessary to begin repairing the damage and planning for the future.

Once the bankruptcy has been finalized, the individual will want to begin repairing his or her credit. This can often be done through the use of a secured credit card. With this type of card, the individual deposits an amount of money into a savings account. Then, the individual has that amount as available credit on his or her credit card. The goal is to rebuild credit by using this card but paying it off each month to show the ability to handle credit.

Filing for Chapter 7 bankruptcy does not mean that an individual will never again be able to purchase a home. This is good news for many Kentucky residents who need relief from their current debt burden. Generally, within two years after the bankruptcy is finalized, the individual may be eligible for an FHA home loan.

Source: mortgage101.com, "Guide to Getting a Mortgage Loan after Bankruptcy Discharge", Accessed on May 2, 2017

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