Filing for bankruptcy may give you the fresh financial start you desperately need. However, you may wonder whether this fresh start impacts your current lease agreement, entails giving up your primary residence, or influences your ability to qualify for a mortgage loan in the future. And so, before you submit any legal paperwork, you must understand the protections you are afforded against landlords, lenders, and housing programs, but also comprehend their rights in the matter, as well. Without further introduction, please continue reading to learn whether filing for bankruptcy will affect your current and future housing situation and how an experienced Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq., P.C., can help you make a well-informed decision here.
Can filing for bankruptcy affect my current rental situation?
First of all, the New York State Bankruptcy Court may order an automatic stay immediately upon receiving your bankruptcy petition. This court order temporarily halts most collection activities by your creditors, including eviction proceedings by your landlord. At the same time, filing for bankruptcy does not automatically terminate your lease agreement, so you remain in your current rental property.
However, this only stands when you stay up-to-date on your monthly rental payments throughout your bankruptcy proceedings. If you fall behind at any point, your landlord may exercise their right to petition the court to lift the automatic stay. They may request the same if you have back rent from before your bankruptcy filing date. Either way, if this motion is granted, your landlord may commence eviction proceedings.
Can a bankruptcy record affect my future housing opportunities?
Hopefully, you, your hired attorney, and your appointed trustee have figured out a way for you to keep your home during your Chapter 7 or Chapter 13 bankruptcy proceedings (i.e., you do not have to liquidate it to pay off your outstanding debts). This may be through the homestead exemption or a sustainable three- to five-year repayment plan, respectively. Regardless, after your case’s close, you may want to commemorate this fresh start by moving residences.
Well, you should know that, generally speaking, mortgage lenders are only willing to approve loan applications if your bankruptcy case is years behind you. Specifically, for a Chapter 7 bankruptcy case, you may have to wait two to four years. As for a Chapter 13 bankruptcy case, you may have to wait one to two years from your final repayment. And even after this time has passed, you may not get the best loan offerings (i.e., high interest rates, shorter repayment periods, etc).
Of note, mortgage lenders may analyze other financial factors, such as your debt-to-income ratio and your credit history. However, you must understand that your bankruptcy case equally affects your credit. That is, your Chapter 7 or Chapter 13 bankruptcy case may remain on your credit report for up to 10 or seven years, respectively. Also, on average, your credit score may drop by 100 to 200 points after a bankruptcy filing, which takes a while to build back up.
To conclude, before you step into a New York bankruptcy courtroom, you must seek a skilled Rockland County bankruptcy attorney to stand by your side. Please contact our office, The Law Offices of Allen A. Kolber, Esq., P.C., as soon as you are ready.
