A foreclosure after bankruptcy does damage your credit, but a bankruptcy gives you an opportunity to start all over again. Many homeowners have experienced both foreclosure and bankruptcy as a result of hard economic times, and declining housing values. So you are not alone. A foreclosure stays on your credit for 7 years. A Chapter 7 bankruptcy stays on 10 years. A Chapter 13 may be removed after 7 years from the date your payment plan shows you paid your creditors in full, otherwise it stays on for 10 years if payment was not paid in full. You can rebuild your credit over time. It's a good idea to get credit counseling assistance so you can learn how to manage your credit more effectively and responsibly.
Debts that Do Not Get Discharged
The following debts do not get discharged after bankruptcy:
- Income tax liability (except for federal taxes that are 3 or more years old, you may get those discharged)
- Spousal and child support
- Student Loans
- Secured debt (except mortgage debt)
- Fines
You are not liable for any foreclosure deficiency judgment, as the bankruptcy wipes that debt out completely.
Getting your Credit Back on Track
To get back on the right financial track, you should consider the following:
- Make a budget, and stick to you it.
- Improve your credit by obtaining one major credit card
- Don’t exceed your credit limit
- Pay your bills on time
- Pay cash whenever possible
- When you obtain a new mortgage, be sure to only work with a reputable mortgage broker, ask questions and read the fine print so there are no surprises
It will probably take at least a couple years to rebuild your credit. If you want to obtain a new mortgage, you may have to wait approximately 2-4 years or longer to obtain one, and you may have to put down a larger down payment up to 30-35%. Until your credit improves, plan on paying higher interest rates.
Talk to an Experienced Attorney
While it is difficult to get a bankruptcy removed from your credit report before 10 years, an attorney may be able to help you get a foreclosure removed if you can prove you were a victim of predatory lending, or there were some other errors made by your lender. The attorney can help you write a dispute letter to the three major credit bureaus. If your lender does not respond to the dispute inquiry, the credit bureaus will automatically remove the foreclosure from your report within 30 days.
