About to file Chapter 13 can I still get a house?

[SimpleSubro]

Hello everyone~

Let me give you a quick run down about me and then you can answer my question.

26 years old, about to file chapter 13 with about 40K worth of credit card debts, I was young and stupid in college which got me here today. Basically back in 2005 I tried that program where they would get you out of debt in 36 months, well 8 months into it they shut down and after that I just never paid again. (I know really really stupid of me but got laid off and FINALLY got a good job now) I have never owned a house and all I have to my name is a Jeep and just random things in my apartment. I have been renting for a year now.

My question is: I am about to file chapter 13 (Because I gross tomuch) and I wanted to know can I still buy a house? I would be considered a first time home buyer? I have talked to a few mortgage brokers and they tell me no but that can't be because why would any one do a chapter 7 or 13? Thanks for the answers in advance.

I have to renew my apartment at the end of Oct 2009.

[StartingOver08]

If you are in bankruptcy you can not qualify for a mortgage. After you have filed, you can qualify for an FHA loan - but you will need probably two years after your discharge (in a Ch 7).

Are you sure you need to file? What are your particulars (income, debt etc)?

Don't jump the gun - filing is really something that is very serious. The fact that you are considering a Ch 13 is a long term commitment (3 to 5 yrs). Just because you are over median does NOT mean that you automatically file a CH 13 - and if your attorney uses that as an excuse, find another attorney.

[oldhack]

Theoretically, FHA guidelines allow you to take on a mortgage -- with trustee/bankrutpcty court permission -- following at least one year of successful, on-time payments into a Chapter 13 plan. I suspect, as a practical matter today, that is unlikely because of market conditions.
However, I'm not alone (I've discovered) in managing to buy a house within a short time after discharge of a completed Chapter 13 plan (in my case, the plan was 43 months, the mortgage came 55 days after discharge) earlier this year, even IN these market conditions.
You're young. Even after five years in a Chapter 13 bankruptcy, should you decide to go that route, you'll only be 31 years old. There are a lot of 31yos looking to buy their first homes, so you'll not be out of your cohort.
Decide what's best for you, and don't let the worry-worts focus on what can't be done.

[optimistic1]

Official FHA Guidelines

E. Bankruptcy.

A Chapter 13 bankruptcy does not disqualify a borrower from obtaining an FHA-insured mortgage provided the lender documents that one year of the payout period under the bankruptcy has elapsed and the borrower’s payment performance has been satisfactory (i.e., all required payments made on time). In addition, the borrower must receive permission from the court to enter into the mortgage transaction.

[Flamingo]

Your chance to buy a house is much better after discharge than during your Chapter 13. First, if you come up with the money to purchase a house at any time during your Plan, the trustee will put that money first towards the creditors before allowing a home purchase. FHA mortgages are obtained during a Chapter 13 mostly for refinancing (as with us). That is why the brokers mentioned to you that if you are able to buy a house, why are you filing BK. Also, if it was easy to purchase a home during a Chapter 13 one can imagine the flood of filings to get rid of debt and easily obtain another house.

It would be a good idea for you to sit down and speak with a BK attorney about your ideas and get a sense of what you should or should not do in your position. To make the odds better for you to be able to obtain a decent mortgage after discharge, make all your plan payments in full and on time, do not apply for too much credit and make all your other bill payments (i.e., utilities, rent, etc.) on time and never be late with anything. Lie low and get through your Plan. It will all work out for you in the end.

[SimpleSubro]

So when I started the debt program back in 2005 I had 5 credit cards that I put into the program. This was to get be back out of the hole that I had gotten myself into. It was a 36 month plan to get me debt free for a fraction of what I had charged up. I would say back in 2005 I had about 25K in Debt. Now fast forward to 2009 I would say the same 5 cards are about 40K or so. The reason I was thinking about chapter 13 is that one of the cards filed a lawsuit against me. It went t the arbitration and I lost then I got served the papers saying they are going to file a judgement on me.

So I call the attorney that has the debt now to see what I can do to pay on that? Maybe 200 dollars a month or something?

I really don't want to file for chapter 13 but I don't know whatelse todo?

I haven't made one payment on any of the 5 cards in almost 4 years. My thought process was just go the full 7 years and maybe they would fall off??

I just want to be able to get a house and then pay the cards off. That was my whole plan but I don't even think that is possible with having those 5 charged off cards.

I do have possible credit though. I have a car loan that I have been paying on time for over a year/half now. I had car loans before that I pay on time. I am still on my fathers sears account that has PERFECT history on. I think my score might be in the mid 550's. MIGHT, I haven't pulled my credit in about 7 months.

What should I do???? I want to get out of the hole or at least get my 725 credit score back......

Ben

[graciemae]

I'm no expert but I don't think you'll find anyone willing to give you a mortgage if you haven't paid your cc in 4 years........It sounds like you want it all, right now. Life doesn't work that way. It sounds like you need to figure out how to handle your debt, whether it be file a 7, a 13, or get a 2nd job (you said you are single and I assume without children) to help pay off your debt. Once you've gotten finances in order, show an ability to budget your money and pay all your bills on time, start saving for emergencies, and start saving for a downpayment on a home then you can start on your quest for homeownership. I know I sound a little harsh, but you are soooo young and I would hate for you to make the mistake that so many of us have made. Some of us have learned our lessons and just want to save others the trouble of learning them the hard way. Good Luck!

[SimpleSubro]

Credit Counseling

Ok so what about doing some sort of credit counseling first? does that sound like a better idea than trying to do a chapter 13? If so do you have a good contact on who I should talk to??? Thanks again for all the advice so far

Ben

[oldhack]

Credit counseling will be part of any current Chapter 13 filing.
If you are talking about letting a credit counseling service pay your creditors for you, my experience was that Chapter 13 was a less-expensive, more-immediate, quicker way to pay them responsibly. My year with a credit counseling service cost me my only 'lates' on my credit record, only lopped a few points off the punitive interest rates I was paying, and left me NO discretionary income. In Chapter 13, the interest rates fell to zilch, the creditors got 80% of their money, everything was paid 'on time', and by the end of it I was putting almost 1/3 of my income into savings (YMMV -- differnent districts and trustees are much more strict about paying available money into the plan). And, the debt is gone.

[SimBroke]

SimpleSubro -

Go to (URL removed by moderator) - He is in Louisville and will help you understand your options. he's the author of the "Tactical Bankruptcy Manual" that is stickied in this forum.

I've researched quite a bit about lawsuits, etc... In Ky, there is case law that basically states that they cannot collect on an arbitration award - goes against Ky law - so do some research before you panic over it and fight as appropriate.

If its truly been 5 years since you last acted on any of these accounts, they are likely past the SOL in Ky as well, so that will be another item in your favor.

[SimBroke]

I'm going to rescind my earlier comment about arbitration awards in ky - I recall reading it but cannot find the relevant links - contact the lawyer at the site I referenced - He will be able to help you.