- The Washington Times - Friday, January 31, 2003

Q: I filed for bankruptcy (Chapter 7) in early 2001, and it was discharged on July 5, 2001. I own a town house. I wanted to sell it and buy a single-family house. My questions are: Do you think I can find a lender willing to give me a loan? I don't have much cash at this time. Should I wait about one more year to sell and buy? I have been told I should wait at least two years.

A: Bankruptcies hit an all-time high last year, and with homeowners still struggling to recover from this most recent recession, they may continue to climb in the next 12 months. Regardless of whether a recession is mild or severe, it's always severe for the people who lose jobs and find it hard to recover before filing for bankruptcy.

People who have filed for bankruptcy can get a mortgage to buy a home in about 18 to 24 months. There's no standardized waiting period; each mortgage company may have different programs to allow borrowers the ability to buy homes regardless of their credit rating and bankruptcy history but be forewarned, you'll most likely pay dearly for it through high fees and higher-than-normal interest rates.

Don't be discouraged about this scenario, however. Keep in mind that with 30-year fixed-rate mortgages going for less than 6 percent right now, high interest rates in today's market are 8 percent to 10 percent. My first mortgage was a 2-1 buy-down with perfect credit; my interest rate started at 10 percent and went up a percentage point per year for the next two years. Interest rates really are all a matter of perspective.

Should you wait to sell or buy property? I get this question a lot. Real estate is a great investment no matter when you buy if you're willing to let time work in your favor.

There are peaks and valleys in the real estate market just as in any other investment. If you're an investor and it's a seller's market, sell, but don't buy unless you're able to pick up a house for a fraction of the market value. If you're talking about whether you should sell and buy a house for your personal residence, that's easy. Sell when your current house peaks and dive into your move-up property.

Obviously, the house you're going to buy is also peaking, but because of the equity in the house you're selling, you have more cash to work with than you ever will possess.

Your house is one of those investments that you get into for just 1 percent to 10 percent of the value of the asset. If you put $10,000 into the stock market, your value is $10,000. If you put $10,000 into real estate, your value can be into the hundreds of thousands of dollars, depending on what kind of financing you were able to acquire.

If you're looking for more information about how you can borrow money after filing bankruptcy, I found a really good Web site with plenty of answers (www.Bankruptcy-Expert.com). The site, maintained by the Moran Law Group, a bankruptcy legal firm in Mount View, Calif., has a very useful section on frequently asked questions, including bankruptcy and homeownership. Go to the table of contents as a starting point.

Finally, before buying another property after your bankruptcy, first seriously consider how you arrived in this situation.

I knew a couple who filed bankruptcy and eventually lost their house to foreclosure. They ended up living for several years in a small apartment with a dog and two children. Once their waiting period was past, however, they went right back into debt as quickly as the creditors would let them.

Their desire to get back on their financial feet was not as great as their appetite for "things" bought on credit. Within a few months, they were back into the financial pressures that had started them down the road to bankruptcy.

If you have filed for bankruptcy in the past, be sure to change your habits before playing the credit game again. Understand the dangers of debt and avoid them at all costs.

M. Anthony Carr has written about real estate for more than 14 years. Reach him by e-mail (manthonycarr@erols.com).

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