If you are considering a bankruptcy filing, the potential ramifications should go into your decision. Most people know that a bankruptcy will negatively affect their credit record, but what about renting an apartment or home? For those who plan to sign a new lease in the next few years, read on to find out how a bankruptcy could affect your ability to be approved for a rental contract.
Your Financial Picture
There are very few landlords or rental management agencies that base rental decisions on just one aspect of your situation. Simply having a bankruptcy on your record is not necessarily a bar to being approved for a rental. Instead, your entire creditworthiness picture is evaluated. Most rental companies and landlords look at the following:
1. Income – The amount of money you make each month is undoubtedly the strongest rental consideration of all. Some places require that you show proof of income equal to at least two to three times the amount of the rent. If your verifiable income is $3,000, for example, you might qualify to rent a $1,000 a month apartment.
2. Debt to Income – Many landlords also look at your budget when making a determination and that is one area were bankruptcy filers can shine. With bankruptcy wiping out your credit card, medical, and other debts, you have more money available to spend on things like rent.
3. Job History – Those with a stable work history appear to landlords more likely to meet their rental obligations.
4. Status of the Bankruptcy – If your case is still in progress, that could negatively affect your chances of renting. In some (but not all) cases, ongoing bankruptcy cases can mean getting turned down. It might be best to wait until your case is fully discharged before moving.
5. Time of the Bankruptcy – The longer the time period between your discharge and the time you apply for a lease, the better your chances. Some places won't consider renters who are only two years past their discharge. It should be mentioned that a chapter 7 bankruptcy will remain on your credit report for 10 years. Once you move past that point, there is no need to disclose it at all when renting or filling out credit applications. Lying on your application, however, is foolish.
7. Credit Score – While a bankruptcy will certainly impact your score, it may not plunge it low enough to be of concern to a landlord. Credit scores are based on more than just a federal bankruptcy filing. If you have evictions, judgments, repossessions, etc on your report, that may be even more damaging than the bankruptcy. Don't wait till more damage is done – fill for bankruptcy in a timely manner.
8. Rental History – If you have a good record of paying rent in the past, that will only help your case when trying to rent again. Even past on-time mortgage payments matter to rental management companies.
To find out more, speak to a chapter 7 bankruptcy attorney as soon as possible.