Many people visit us after being turned down for a home loan. Their credit is just too bad. They are surprised because much of the debt is quite old and they feel they can afford a house based on their current income.
The problem is that the debt doesn’t just go away and many collectors get very aggressive when the debt is old. Mortgage companies know this and do not want to lend when the borrower is vulnerable to creditors who may interfere with the person’s ability to pay the mortgage if they are garnished and suffer a reduction in pay.
Many good mortgage brokers say, “File Chapter 7 Bankruptcy and come back in two years.” Many lenders will consider a loan application two years after the bankruptcy is over (longer sometimes if the bankruptcy includes an earlier foreclosure on another property).
The bottom line is that people need a fresh financial start that only Chapter 7 can give them to move on with their lives, including the dream of one day owning a home for their family.