MOST PEOPLE CAN GET A HOUSE OR APARTMENT ABOUT 3 MONTHS AFTER BANKRUPTCY
Shelter and food are the most basic necessities for human life.
Nowadays landlords will often check credit history when people apply to rent a house or apartment, so prospective landlord will know about any bankruptcies.
The question is:
- Will they discriminate against applicants because of it?
IS IT ILLEGAL TO DISCRIMINATE IN RENTALS BECAUSE OF BANKRUPTCY?
- Although it isn’t illegal to discriminate in rentals because of a bankruptcy, my experience has been that the bankruptcy doesn’t hurt, and can often help to rent an apartment
In the aftermath of the mortgage foreclosure crisis of the mid 2000s, lots of people had to file bankruptcy and let their houses go to foreclosure.
They were all able to find places to rent after moving out.
A few years ago I started getting requests for bankruptcy documents to help my previous clients qualify for a new mortgage.
WHEN CAN I GET A MORTGAGE AFTER BANKRUPTCY?
In our experience:
- You can get an FHA mortgage about 2 years after bankruptcy
- A good rule of thumb for when it is OK to look for a new place to rent after bankruptcy is 3 months after filing
Lots of my clients who filed during the foreclosure crisis now own their homes again and are doing fine.
WHEN CAN PEOPLE RENT AN APARTMENT AFTER BANKRUPTCY?
- People are usually able to get a good apartment at the 3-month point from bankruptcy because they are more financially stable
Both of these events show that the renter’s financial life is stabilizing and that they will be able to pay the rent in the future.
The only person who was unable to find a place to rent after filing bankruptcy with Walker & Walker was actually denied because she had two dogs that each weighed 150 pounds, and landlords were worried that the dogs would damage their properties!
HOW DO WE KNOW?
We watch very closely to see if people are having a difficult time renting after bankruptcy.
This would be a huge problem, and we work to fix problems for our clients, not to create them.
WHY DOES BANKRUPTCY MAKES PEOPLE BETTER RENTAL APPLICANTS?
Chapter 7 Bankruptcy or Chapter 13 Bankruptcy improves a person’s financial stability.
- Landlords are looking for people that will be able to afford the rent every month and who won’t damage the property
- Someone with a recent bankruptcy and no debt, is safer than person with lots of debt but no bankruptcy
This is because bankruptcy IMPROVES your financial situation.
It removes lots of debts, but leaves all of the income and assets in place.
WHY IS DEBT SO BAD FOR THOSE WHO RENT?
Debt is often bad for a person’s overall finances, but income and assets are always good.
The moment when someone is most likely to be unable to pay their rent is when their paychecks are being garnished by a debt collector or lender.
Once a creditor or bank gets a judgement against someone in Minnesota, that creditor can garnish 25% of the borrower’s paycheck and freeze, or levy, that person’s bank accounts.
This is disastrous if the creditor freezes the account just before the landlord cashes the rent check.
Bankruptcy voids judgements and stops garnishment and bank levy immediately.
In many cases, we can get back money that creditors have taken from you in the months before filing the bankruptcy.
Being garnished 25% of your pay for 3 months often adds up to a few thousand dollars.
I have had clients who used this return of garnished funds as a security deposit and first month’s rent on a new place.
If you’re struggling financially and need to find somewhere to rent or buy, then call us at 612.824.4357 today to tell us how filing for bankruptcy in Minnesota can help you.