Renting after bankruptcy can be a challenging and emotional experience for many individuals. The process of going through bankruptcy can be overwhelming, and the aftermath can leave a person feeling defeated and hopeless. However, it is important to remember that bankruptcy is not the end, and there are steps that can be taken to move forward and secure a rental property. Given the way bankruptcies affect credit records, there is no wonder that renting after a bankruptcy can be difficult.
According to a recent survey, 43% of homeowners perform credit checks as part of their tenant screening process and 48% of those homeowners consider the result of credit checks as one of the primary factors in considering a lease application. This is because non-payment of rent is considered a homeowners’ top concern and one of the ways they determine if a renter is able to pay on time is by obtaining credit records.
While bankruptcy may stay on your credit report for up to 10 years, it doesn’t mean you won’t be able to find or be allowed to rent a property. Many homeowners are willing to work with individuals who have gone through bankruptcy as long as certain requirements are met. Additionally, there are steps you can take to improve your chances of securing a place to rent.
In this article, we will discuss the impact of bankruptcy on renting as well as how soon you can rent after bankruptcy. We’ll also share with you some tips on how to increase your chances of renting a property.
The impact of bankruptcy on renting
When a homeowner checks an applicant’s credit report, a bankruptcy record can be a red flag. Many homeowners may see it as a sign of financial instability and may be hesitant to rent to someone with bankruptcy on their record. This can lead to a number of challenges for renters, such as:
- Higher security deposit requirements: Rental owners may require a higher security deposit from renters with bankruptcy on their record to cover any potential unpaid rent. This can be a significant financial burden for renters already struggling financially.
- Renting in advance: Rental property owners may also require renters with bankruptcy to pay rent in advance or to have a certain amount of savings before they approve the rental application.
- Requiring a cosigner or guarantor: Some homeowners may require renters with bankruptcy to have a cosigner or guarantor sign the lease. This can be difficult for renters who do not have family members or friends who are willing to do so.
- Limited options: Renters with bankruptcy may find that their options for finding a new place to live are limited. Homeowners who are willing to rent to individuals with a bankruptcy history may be few and far between, making it more difficult to find a suitable place to rent.
While these challenges exist, it is important to remember that it is not the end. Despite some roadblocks, you can secure a rental property and move forward by following the right tips.
7 tips for renting after bankruptcy
Although credit reports are an important part of the screening process, those aren’t the only things rental owners look at when leasing their property. Thus, there are other ways to increase your chances of renting a home.
Here are some tips on renting after bankruptcy:
1. Rent from an individual owner
Most property management companies and agencies follow a rigid set of criteria for accepting or rejecting applicants. Hence, when you have bad credit, they may automatically decline your application without hearing you out.
Some individual rental owners, however, may give you more leeway as they are the ones who create their own criteria. This is provided that you can prove to them that you can pay your rent on time.
2. Check the screening criteria
Screening criteria differ from one rental property to another. While roughly half of all property owners require credit checks and will base their decision on their results, there are almost equally as many property owners who do not rely on credit records in making a decision.
If you take the time to check the screening criteria on a property you like, you may be able to see properties for rent that do not require a good credit history. Just be prepared to present other forms of assurance like rent history and employment verification.
3. Find a cosigner or a guarantor
If you can, find a family member or a friend to be your cosigner. Rental owners are more likely to lease you their property if they are guaranteed that someone with good credit will pay your rent in the event that you stop paying rent.
Of course, the full responsibility of paying rent is still yours and you should never rely on your cosigner to pay your rent for you. But to a homeowner, they serve as an assurance that checks will be coming in.
4. Make use of your good rental history
Homeowners want to make sure that they’re leasing a property to someone who isn’t going to default or delay rent payments. Your rental history and previous landlord may be your best bet in proving this.
If you have a good landlord-tenant relationship with your previous landlord, they may be able to help you secure a lease by presenting them as a reference. Be sure to call them ahead of time, explain the situation, and ask them if they could put in a good word for you. You can also present your rental records as proof of timely payments.
5. Present proof of employment and income
Aside from credit reports and rental history, most homeowners will look for some type of proof that you are earning and have a stable income. This can be in the form of
- Pay stubs
- Bank statements
- Tax returns
- W2 form
Some homeowners will call your employer to verify the information you provided, so make sure you give them accurate information.
6. Explain your situation
When applying for a lease, be honest and direct about your bankruptcy. Of course, your bankruptcy is a personal matter, but you may choose to explain to the rental owner why filing was the best option in your particular case.
If the bankruptcy explanation is understandable, such as for medical reasons, the rental owner may be able to appreciate why you filed. It’s also a good idea to explain the steps you took to improve your financial situation.
If you’ve filed for a Chapter 7 bankruptcy, you can also point out that because some of your debt was discharged, you now have available income to pay your rent.
7. Fix your credit score and don’t take on more debt
When you file for a Chapter 7 bankruptcy, the court will discharge your “pre-petition debts”, meaning, the debts you incurred before filing. But it does not discharge debts you incur after you file. Hence, rental property owners may look at the timing of your filing and the date of your debts.
Don’t take on more unnecessary debt after you’ve filed for bankruptcy to keep your debt-to-income ratio low. This also communicates to rental owners that you are responsible with your finances. Furthermore, fix your credit score by paying your remaining obligations on time.
How soon can I rent a house after bankruptcy?
There are no laws prohibiting individuals from renting a house after filing for bankruptcy. This means you can rent a house anytime during and after. The challenge is finding a rental owner who is willing to rent you their property despite your bankruptcy.
There are a few factors that could affect their decision-making including the type of bankruptcy you filed, the length of the bankruptcy process, and its current status.
Chapter 7 bankruptcy can be discharged in as little as four months. In this type of bankruptcy, the court discharges some of your debts like medical and credit card bills, essentially giving you a fresh start. Rental owners may look at this favorably.
Chapter 13 bankruptcy, on the other hand, does not eliminate your debt, rather, reorganizes it into monthly installments usually ranging from 3 to 5 years. This takes a longer time to get discharged, hence, rental owners will still look at a Chapter 13 bankruptcy as credit.
It’s important to note that even if the bankruptcy is discharged, it may still be difficult to find a homeowner willing to rent to you right away. Homeowners may see the bankruptcy as a sign of financial instability and may be hesitant to rent to someone with a recent bankruptcy on their credit report.
However, as time goes by, the impact of the bankruptcy on your credit report will decrease, and homeowners may be more willing to rent to you. It’s also recommended to work on improving your credit score by paying bills on time, reducing credit card balances, and limiting new credit applications.
It’s important to note that some homeowners may not be as strict on credit history, and willing to take into account other factors such as income, reference, job stability, and even personal interviews. So make sure you ace the other criterias to improve your chances of securing a home.
Can rental property owners deny my application because of bankruptcy?
While The Fair Housing Act protects you from being denied housing based on
- race or color
- national origin
- familial status, or
property owners have the legal right to deny an applicant if the result of the credit report does not meet their criteria. Thus, property owners can deny your application because of a history of bankruptcy.
In conclusion, the process of renting after bankruptcy can be a difficult and emotional task. Many homeowners may see bankruptcy on your record as a red flag for financial instability, however, there are ways to increase your chances of securing housing. Renting from an individual owner, checking the screening criteria, finding a cosigner or guarantor, and asking your former landlord for a reference can all help to improve your chances of finding a place to rent.
Additionally, taking steps to improve your credit score, such as paying bills on time and reducing debt, can also help you secure housing in the future. While bankruptcy may stay on your credit report for up to 10 years, it doesn’t mean you won’t be able to find a place to rent. With the right approach, you can find a suitable rental property and start rebuilding your financial stability and credit history. Stay focused on your goals and don’t let setbacks discourage you from finding the right home.