Home Ownership After Personal Bankruptcy in Massachusetts
Filing a Chapter 7 personal bankruptcy (generally) allows you to either keep your home or walk away from a home that is “underwater” in mortgage debt. On the other hand, if you don’t have a home, how soon after filing for bankruptcy protection will it take to be able to buy a home? Home ownership is 73% over the general population, 68% with those that filed bankruptcy over 15 years ago, and 50% for folks that have recently, according to a study by Ohio State Professor Jay Zagorsky regarding life after bankruptcy.
After you get a discharge in bankruptcy you can buy a house, but as a practical matter, you need to both save up for a down payment as well as be qualified for a mortgage. Saving following bankruptcy is often easier than you might think, as there is no credit card debt dragging you down. Getting a favorable mortgage rate can be difficult, especially within the first two years. However, after that your FICO score is no longer adversely affected by the bankruptcy. See our previous blog article for tips on how to improve your FICO score.
While the American dream of home ownership is valid, it is no longer Bedford Falls v. Pottersville, like in It’s a Wonderful Life. Home ownership is no longer a guarantee of “building wealth” because increased prices are a function of when you buy and when you sell. Home ownership is not a universal sign of community stability; when we look at France, Germany and Switzerland, all have lower rates of home ownership.