Personal bankruptcy is the most common type of bankruptcy.
Lots of ordinary people are unable to keep up with their debts especially when they have lost their jobs or maybe because of serious illness.
Problems in personal relationship that have altered ones ability to function normally can also be one of the root causes of this problem.
As you can see, this is not a pleasant situation.
A person undergoing bankruptcy can have lots of troubles like being chased by different people.
Under the law, filing for bankruptcy is legal.
People are allowed to file for it once in every 6 years.
However, it can only be applicable to your current debt and not other debts that you will incur after the filing.
Filing for bankruptcy may have its own advantages.
This is one way to stop creditors, IRS and landlords pursuing their collections.
The court would order an automatic stay so that no one can sue or run after a person's properties and stop all forms of harassment.
Although this may sound good for those who are fully impaired in paying their debts, it also has a negative impact financially.
One of which is their future major purchases like buying a home.
Effects to Future Home Purchases There are different ways to buy a home.
One is by paying it in full.
The other one is by getting it financed.
In reality, paying in full rarely happens.
Most people get their homes by paying cash as a down payment and the rest is usually financed by obtaining mortgage.
You probably know by now that getting mortgage is affected by your credit standing.
If it is good, you usually get good deals.
If it is bad, the higher your rates will be.
However, in the case of bankruptcy getting a deal might be impossible .
Most of the lenders would reject your application if they see that you have filed for bankruptcy.
Moreover, it gets more difficult for you because this will reflect on your credit standing for 10 years.
In those years, it would be a struggle on your part to make any major purchases.
Redeeming credit to Purchase a New Home What are the odds of purchasing a home despite having bankruptcy? At first, the chances are very slim.
However, most people who file for bankruptcy can redeem their credit.
It takes awfully a long time to do this.
But once they do, they may be granted mortgage loans.
However, these debts will be subjected to high rates.
Bankruptcy will be erased from their credit report after 10 years.
However, it does not mean that this will be the only time they can get a loan.
Although, it would be like passing through a needle hole, it is possible.
To do this, they must redeem their credit first by doing the following: 1.
Avoiding unmanageable debt.
2.
Use of secured credit cards 3.
Availing of loans for high-risk borrowers.
4.
Applying for a department store credit card and paying them on time.
If you lenders have seen a good trend of payment from the recent credit, then they can grant them a loan without waiting for the removal of the bankruptcy status.