What Happens When You Declare Bankruptcy and Purchasing A Home

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Even though bankruptcy has plenty of financial consequences, it surely doesn’t mean the end of the world. Lots of folks file for bankruptcy for plenty of reasons, and this number only increases with the difficult economic conditions that we encounter today. According to data from the Australian Financial Security Authority (AFSA), there were 7,466 incidents of bankruptcy in Australia in the September 2014 quarter alone. Getting bankruptcy advice is essential so you become informed of exactly what happens financially when you declare bankruptcy.

There are two categories of bankruptcy: undischarged bankruptcy and discharged bankruptcy. Undischarged bankruptcy indicates that you are currently in the process of bankruptcy and are not able to acquire any kind of loan. Discharged bankruptcy indicates that you are no longer bankrupt, and can secure a loan with various specialist lenders. Bankruptcy ordinarily lasts for three years however can be lengthened in some scenarios.

Unfortunately, the banks don’t list the reasons for your bankruptcy and this can make it really difficult to get a home loan approved when you are eventually discharged. Whether you will be able to purchase a home after bankruptcy relies on a number of factors, including the type of loan you’re after and how you deal with your credit rating once declared bankrupt. What’s definite is that your spending capability will be constricted, and repossession of property is typical.

Can you get a home loan approved after bankruptcy?

There are a number of specialist lenders providing home loans to borrowers that have been discharged from bankruptcy for as little as one day. Whilst many of these loans feature a higher interest rate and fees, they are nonetheless an option for individuals that are serious. Most of the time, a larger deposit is needed and there are stricter terms and conditions when compared to standard home loans.

There are numerous differences amongst lenders for discharged bankruptcy loan approvals. A few lenders will even offer discounted rates to those whose finances are in good shape and who have good rental history, if applicable. The length of time between your discharge and loan application will likewise affect the result of your application. Two years is typically advised. On top of that, maintaining a stable income and employment are likewise factors which will be considered. Most bankrupt people will also actively attempt to bolster their credit rating quickly to reduce the hardship of bankruptcy once discharged.

Points to consider when applying for a home loan once discharged.

Deciding on a suitable lender is essential, so it’s a good idea to select a lender that not only provides loans to discharged bankrupts but one that is widely known and trustworthy. By doing this, you will feel comfortable that you’re securing decent terms and conditions and your application is more likely to be approved. There are several dubious lenders on the market that exploit the financially vulnerable, so please be careful. Another valuable factor to take into account is that you should not apply to more than one lender simultaneously. Every loan application surfaces on your credit history, and numerous applications simultaneously are seen negatively by lenders.

Pros and cons of home loans for discharged bankrupts


You can still a loan. Though it may be difficult, it is still conceivable for discharged bankrupts to get a home loan approved.

The longer you’ve been discharged, the easier it gets. Spending time restoring your finances demonstrates to the lenders that you are financially responsible.

Your credit rating will improve. Simple tasks such as paying your bills on time and producing steady income will improve your credit rating.


You can’t obtain a loan until you are discharged. Most lenders will not approve any loans to those that are undischarged to prevent jeopardizing any further financial distress.

Increased rates and fees. Typically, interest rates and fees will be increased for discharged bankruptcy loans. You can only get lower interest rates with a larger deposit.

Record of bankruptcy. You will have a record of bankruptcy on your credit history for seven years after discharge, and your name will always be on the National Personal Insolvency Index (NPII).


Bankruptcy is never a pleasurable experience, but it doesn’t signify that you’ll never own a home again. Because of the intricacy of bankruptcy, it’s vital to seek professional advice from the experts to make certain you understand the process and therefore make wise financial decisions. For more details or to speak to someone about your situation, contact Bankruptcy Experts Sydney on 1300 795 575 or visit http://www.bankruptcyexpertssydney.com.au