A personal bankruptcy stands out as a conspicuous blemish on a consumer’s credit report for as long as 10 years, but the barrier it presents to obtaining a mortgage doesn’t have to last that long, according to a New York Times analysis yesterday. Many individuals who sought bankruptcy protection during the recent recession, which officially ended in 2009, may now be eligible to apply for a mortgage. The mandatory waiting periods to apply for a mortgage backed by Fannie Mae or the Federal Housing Administration last from two to four years. Personal bankruptcy filings climbed steadily beginning in 2007 before peaking in 2010 at about 1.5 million filings, according to the American Bankruptcy Institute. Households that went through a chapter 7 liquidation bankruptcy must wait four years from the date of discharge (when their debts are wiped out) before applying for a conventional loan. The waiting period, according to Fannie Mae guidelines, is two years from discharge for chapter 13 bankruptcies, in which debts are partially repaid under a court-approved plan. The wait for a Federal Housing Administration loan is two years for chapter 7, and one year for chapter 13, provided the individual has kept up with payments under the reorganization plan and has permission from the court.
