One of the biggest concerns that people have when they are considering Bankruptcy is the effect it will have on their home, either the one that they already have, or the one that they are hoping to get; “I will never be able to get a home loan” is one of the most common things we hear over our Bankruptcy advice line. This fear, though, is a misconception.
When you declare yourself Bankrupt there are two records kept. One of them is a permanent record on the National Personal Insolvency Index, which is a government record of acts of insolvency. This index is very rarely looked at by banks though, as they have to pay a fee every time they search it – it would simply cost them too much! The other record is a default on your credit file, and that one lasts for seven years.
It is an obvious fact that whilst you are Bankrupt you will not be applying for a home loan. You are only a Bankrupt person, though, for three years, providing of course that you comply with all of the instructions of your Trustee. This means that after the three years of your Bankruptcy you will have four years left during which there will be a mark on your credit file.
Remember, though, that a default does not always stop you from getting credit. It will most certainly have an effect on the application process, but you could still be granted a home loan on the basis of other criteria, such as having a large deposit and a good income and savings history. You may find that joint mortgage applications are looked upon more favourably if one of you has a clean credit file. And another important thing to remember is the simple truth that if you are considering Bankruptcy, you are most certainly not in a position to be considering a mortgage anyway. For some people, declaring Bankruptcy gives them the fresh start they need to be able to start saving for a deposit, so when the seven year default period is up, they are actually in a better lending position than they were before the Bankruptcy.
If your financial situation is such that you are genuinely considering Bankruptcy, you should not let the fear of not being able to get a mortgage stop you. You need help now, and the longer you delay, the longer you delay the time when you will actually be in a position to apply for a mortgage. The mark on your credit file from Bankruptcy may not actually stop you from being granted a home loan, and even if it does, it is only for seven years. For more information on Bankruptcy and how it might affect your financial future, call one of our debt consultants today on 1800 462 767 and find out everything you need in order to make an informed decision.