Bankruptcy and Home Buying in Pennsylvania: What You Need to Know

After bankruptcy, it is likely for one’s financial situation to stay relatively unstable. Trying to get out of that phase and rebuilding your finances is stressful as it is, but what about your home buying needs? Can you enter the housing market in Pennsylvania after filing for a Chapter 7 or a Chapter 13 bankruptcy? What type of loans would you qualify for at this time?

If such questions are coming to your mind, worry not! This post will cover what you need to know about the housing supply in Pennsylvania for individuals embroiled in bankruptcy, how to qualify, and more.

Is It Possible to Buy a Home in Pennsylvania After Bankruptcy?

Indeed, certain legalities apply in different states, especially for significant transactions like real estate purchases. In Pennsylvania, there are options available for homebuyers to purchase a property after bankruptcy filing, with certain limitations to qualify. Factors that affect this include:

  • The bankruptcy type, like Chapter 7 or Chapter 13 bankruptcy
  • Time since the bankruptcy discharge
  • Type of mortgage loan one is applying for

Waiting periods can differ based on the type of bankruptcy. Typically, buyers who have filed for Chapter 7 bankruptcy have to wait between two to four years before becoming eligible to apply for mortgage loan approval. Plus, some buyers with Chapter 13 bankruptcy can qualify for federal loans immediately after the discharge date.

Individuals have to wait four years from the discharge date (for Chapter 7) or from the filing date (for Chapter 13) to apply for conventional loans.

Why Is It Difficult to Buy a Home After Filing for Bankruptcy?

People who file for bankruptcy usually take this step as their last resort to eliminate debt after having exhausted other debt relief strategies. Thus, it is safe to assume that their financial situation is volatile at this time. Most home sellers hesitate to accept such individuals as buyers given the high financial risk, lack of creditworthiness, potential sale delay, default risk, and more.

But if you are planning to buy a home after just starting the filing process, i.e., the earliest stage of the bankruptcy process, you may not qualify for many options.

In Pennsylvania, how can you buy a home after bankruptcy?

In Pennsylvania, buyers can qualify to purchase a property after filing for bankruptcy, but they need to wait for the full process to complete first.

After the bankruptcy discharge date, you will become free from all your existing debts. Your previous creditors can no longer take legal action against you to collect the debt amount. But you will experience a huge drop in your credit score after bankruptcy discharge, like 200 points approximately. So, going through a waiting period is compulsory to qualify for loans with good mortgage rates.

In Pennsylvania, only individual debtors can file for bankruptcy instead of partnerships or corporations. After filing, one has to wait around 3-4 months for the debt discharge. However, the waiting period for applying for a mortgage loan after the discharge can vary depending on whether they had Chapter 7 or Chapter 13 bankruptcy. So, you should use this time to improve your finances.

Steps to Purchase a House After Bankruptcy Filing:

Take the following steps first to buy a home in Pennsylvania after bankruptcy.

Prioritize Credit Rebuilding

You should improve your financial habits after bankruptcy, like paying bills and active debt repayments on time. It takes around six months for debts to dissolve under Chapter 7 and up to 5 years under Chapter 13 bankruptcy. You should make all remaining payments on time to improve your score.

Additionally, you should go through your credit report to see if discrepancies exist. Then, dispute any available errors you find. Focus on increasing your credit score seriously since lenders check for noticeable improvements in credit score after bankruptcy.

Try To Get A Pre-Approval

You can apply for mortgage pre-approval with lenders. While not everyone may agree, you might succeed with one or two lenders if you qualify for their requirements. Some home sellers may go forward with the home selling process if you show this proof of financing first.

For example, you can try for FHA loans, with less strict credit score and down payment requirements.

Save Up For The Home Down Payment

You can start saving up money to pay a down payment on the property you want to buy. If you have enough funding to deliver a down payment on the house you are buying, the seller may accept your proposal. As a target, you should have at least a 5% down payment available for a conventional home loan or a 3.5% down payment to qualify for an FHA loan.

Inform The Seller

Transparency is key to establishing a good buyer-seller relationship. You can do that with home sellers- being honest about your situation may help you maintain good standing with them. Write a wall-crafter letter about your financial situation, with full context about how it happened. Plus, you can mention what steps you have taken to pay off debt, including your present actions to rebuild your finances.


After filing for bankruptcy, you can still buy a house within the state of Pennsylvania. But, you should go through the appropriate waiting period after the bankruptcy discharge to improve your financial condition to qualify for good real estate deals. Focus on improving your credit and making timely payments.

Also, do not take up any new debts after bankruptcy. This way, you can comfortably make your mortgage payments and avoid going into debt again. If you see yourself struggling with your loan payments again, you can try tactics like debt consolidation to simplify the debt repayment process. You can consult with a qualified financial advisor for more specialized support, if needed.

Author Bio:

Attorney Loretta KildayAttorney Loretta Kilday has over 36 years of litigation and transactional experience, specializing in business, collection, and family law. She frequently writes on various financial and legal matters. She is a graduate of DePaul University with a Juris Doctor degree and a spokesperson for Debt Consolidation Care (DebtCC) online debt relief forum.

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