A Chapter 13 bankruptcy, which involves a payment plan, may stay on your credit record for up to seven years. On the other hand, a Chapter 7 bankruptcy, which discharges unsecured debt and doesn't seek to pay any of it back, may be reported for up to 10 years. Some Pennsylvania residents believe that they cannot get a mortgage to buy a home for at least that amount of time. The fact is, however, that they will often become eligible for a mortgage much sooner than the expiration of the reporting periods.
The turmoil of the recession necessitated a great many bankruptcy filings by hard-working middle-class consumers. These people were normally used to paying their debt on time and had been doing so for many years. Some were innocently caught unprepared for unemployment, excess medical bills, unaffordable medical insurance, skyrocketing student loan debt, and rising prices. Of course, many of these same factors continue to impact the lives of some consumers who have not yet obtained federal bankruptcy relief.
Reeling from unemployment and other catastrophes, many consumers turned to credit cards to pay extraordinary expenses and for basic survival in the recession and its aftermath. The numbers of bankruptcies grew in steady progression, making it now virtually impossible for government and private lenders to ignore the legitimate and worthy needs of that group of people. That is particularly true when it is seen that those who have filed for this vital government relief are largely an indispensable part of the country's economic backbone.
The general rule of the FHA, Fannie May and private lenders calls for a solid period of two to four years of sterling post-bankruptcy payment activities after a Chapter 7. This applies in Pennsylvania and other states. We've explained in other articles some techniques you can use to restore your payment history. The bottom line is to pay your accounts in full and on time each and every month, while watching your credit score climb back up to its deserving credit-worthy level.
Source: The New York Times, "Mortgages After Bankruptcy", Lisa Prevost, Oct. 30, 2014