For those struggling with debt, filing for bankruptcy is a way to hit refresh on your financial life. Bankruptcy can allow debtors to discharge certain debts and restructure others with their creditors, in order to make them less of a monthly burden. In many ways, bankruptcy is about helping to make things easier for debtors, allowing them to release or restructure their debt obligations and empowering them to move forward as an active participant in the economy.
With that said, it’s also important to recognize that bankruptcy can have a ripple effect on other aspects of your life, including your ability to purchase or rent a home.
For instance? Generally speaking, there are certain waiting periods in place for consumers to get certain types of housing loans after bankruptcy. Chapter 7 filers may need to wait up to four years to receive a conventional mortgage loan, for example, or two years for an FHA or VA loan. Similarly, Chapter 13 filers may need to wait up to two years to receive a conventional loan, or a year for FHA and VA loans.
Does bankruptcy have a similar effect when it comes to renting? The answer is both “yes and no.” Let’s explore the ins and outs of applying for a home or apartment rental after bankruptcy – including what goes into the process, and what renters may be able to do to improve their chances of renting after a bankruptcy.
When Can You Rent an Apartment After Bankruptcy?
Strictly speaking, filing for bankruptcy does not directly impact your ability to rent a house or apartment. That is to say that there are no built-in rules for “seasoning periods,” as there are when seeking a loan to purchase a property after bankruptcy.
With that being said, though, having a bankruptcy on your record can certainly indirectly impact your ability to rent a home. In particular, it’s important to remember that most landlords and rental companies will perform a credit and background search as part of the rental application process. Remember that bankruptcy can have an impact on your credit score in the short-term, which may make you look less reliable as a renter. In the long-term, bear in mind that a bankruptcy filing will appear on your credit report for seven to ten years. This may be enough for some potential landlords to deny you a rental.
Now, at the same time, it’s important to remember that it’s not all doom and gloom. Many, many individuals who file for bankruptcy are able to reenter the rental market – and, often, purchase a home down the line, as well.
In some cases, a bankruptcy may not be as much of a red flag to landlords as you might think. In fact, some landlords may see a bankruptcy and see a renter with more available income, due to debts being restructured or discharged. In other cases, landlords may have more trust for tenants with a previous bankruptcy. For one thing, this potential tenant may be highly motivated to make payments on time, in order to preserve their financial standing after bankruptcy. For another, there are limits on when and how someone can file for bankruptcy or discharge their debts multiple times, meaning that the landlord will be in a position to collect their debts should the renter ever fall behind.
In other circumstances, a bankruptcy on a rental applicant’s credit report may be neither a dealbreaker nor an incentive for a landlord, but simply one factor to be weighed, among many others. Broadly speaking, landlords tend to look at a few major criteria when vetting rental candidates, often prioritizing some over others – including rental history and source of income. If a renter can prove that they made timely rental payments and avoided eviction at past residences, and/or have a viable source of income for making current payments, landlords may be more willing to give these renters a shot, even with a bankruptcy in their credit history.
Is There Anything Debtors Can Do to Improve Their Chances of Renting After Bankruptcy?
While no two situations are ever going to be exactly alike, there are some commonsense steps that individuals who have filed for bankruptcy may be able to take to improve their chances of securing a rental after bankruptcy, including:
- Finding the right rental property. It may help to do some research in your local rental market. In many areas, there are some landlords and rental companies with “no credit check” policies. In other cases, it may help to look for rentals near colleges or universities, where landlords may be lenient to applicants with poor or no credit. Applicants may also benefit from trying to apply from private property owners, rather than large rental companies. Private owners may be more willing to hear your story and understand the specifics of your bankruptcy experience.
- Having a list of references. Positive references from previous landlords, employers, and business associates can go a long way towards vouching for your reliability as a renter. In some cases, it may also help to have someone who is willing to act as a cosigner on a lease, who promises to assume financial responsibility if you ever fail to make payments.
- Presenting rent payment records and proof of income. As we noted above, these are two of the biggest categories that landlords are likely to consider. If you can present references and proof of payment from prior landlords that prove your history of being a dependable tenant, this can be a major notch in your favor. Similarly, landlords are often more likely to rent to applicants with proof of employment and a steady income.
- Waiting a sufficient period of time. The further removed you are from your bankruptcy, the more landlords might be willing to look at other aspects of your financial history. While there is no set waiting period for renting after bankruptcy, it may help to wait several months before applying for new housing – this can give you enough time to start rebuilding your credit and establishing positive financial habits.
- Being proactive about improving your credit. Landlords may be more willing to overlook a past bankruptcy if you can prove your recent trustworthiness. Broadly speaking, one of the most important steps to take post-bankruptcy is to start establishing sound financial habits and taking steps to rebuild your credit by making regular payments, building your savings, and avoiding taking on new debts.
Have Any More Questions About Bankruptcy In Chicagoland?
Now, as we mentioned earlier, it’s important to remember that the specific circumstances around bankruptcy will vary from person to person, or case to case. Similarly, it’s important to realize that the bankruptcy process can be complex and emotionally trying. Bear in mind that what comes immediately before and after bankruptcy can have a huge and lasting impact on your financial future.
While it is not strictly required to bring on an attorney for bankruptcy matters in the state of Illinois, many consumers will find that this process is made easier – and, ultimately, more productive and beneficial in the long term – with the assistance of an experienced legal professional.
That’s where the Gunderson Law Firm can step in. At Gunderson Law Firm, we strive to protect our clients’ assets to the full extent allowed by today’s laws throughout the complex bankruptcy process, helping them get the debt relief they not only need, but genuinely deserve.
Moving through the bankruptcy process, we can also counsel you on realistic ways to avoid serious debt issues in the future. Whether you are a business owner, a wage earner, retired, or otherwise, we can address your specific situation with strategic plans to help put severe indebtedness behind you, so you can enjoy life again.
Looking for a second chance? Interested in learning more about bankruptcy and realistic financial planning as a way to leave debt in the past? Drop us a line or give us a call whenever you’d like to continue the conversation.