Finding Housing After Filing Bankruptcy

What’s the largest bill you have every month? If you are like the vast majority of Americans, it’s your rent or mortgage payment. Read on to learn about finding affordable housing after bankruptcy.

What Is Affordable Housing?


According to the US Department of Housing and Urban Development, housing is considered unaffordable when a mortgage or rental payment accounts for more than 30% of a household’s annual income. Unaffordable housing is the leading cause of bankruptcy.

According to HUD, there is not a single market in the United States where a worker making the minimum wage can afford a two-bedroom apartment priced at fair market value, and twelve million households are currently committed to spending 50% or more of their income on housing. 

What Happens When Families Commit to Unaffordable Housing?

The result of this unfortunate economic reality is that millions of families are just one bad month away from default on their mortgages or rents. With no savings, unaffordable housing, and the necessity of an automobile in many rural and suburban parts of the United States, many families rely on credit cards to cover for an empty checking account.

If you’ve found yourself in this situation, you know it’s just a matter of time before this catches up with you:

  • Your car gets repossessed. 
  • You get evicted for missed rent. 
  • You are sued for unpaid debt. 
  • Your accounts get frozen and wages garnished. 
  • Your mortgage lender moves to repossess your home.

The solution? File bankruptcy. This freezes any collection actions and lawsuits, and offers a path to discharge your debt. Bankruptcy also entails credit counseling that will help you plan for a healthier financial future.

One of the biggest concerns people have after filing bankruptcy, and one of the great fears that often keep people from filing bankruptcy until far too late, is the availability of housing.

Can I Stay In My Home After Bankruptcy? 

The chance to stay in your home will depend on how and when you file bankruptcy and how much income you have available to spend on housing.

Housing and Chapter 7 Bankruptcy

Chapter 7 bankruptcy requires you to surrender all assets above a certain amount. The current federal exemption for your residence is $25,150, or $50,300 if you are married and file jointly for bankruptcy. Any equity you have in your home above that threshold could be liquidated by your bankruptcy trustee. This usually means the home gets sold, you are paid up to the exemption amount, and the remainder goes towards paying creditors.

Housing and Chapter 13 Bankruptcy

If you have equity above and beyond the exemption, you may be advised to file Chapter 13 bankruptcy. Chapter 13 reduces debts by creating a modified payment plan, not by selling your assets. If you file Chapter 13, as long as you have the income to make monthly mortgage payments and you are able to make your plan payments, you can keep your home. 

Housing and Chapter 11 Bankruptcy

Chapter 11 might be an option if you are a high-income individual and your home is particularly valuable. Under Chapter 11, you may be able to renegotiate any mortgages out to a 30-year loan.

All of this is under the assumption, of course, that you are still in your home. If you were evicted prior to filing bankruptcy, most states do not recognize any right of redemption. While filing could freeze an ongoing eviction or sheriff’s sale, your bankruptcy cannot undo a sale or get back a house you have already lost.

How Long After Bankruptcy Before I Can Rent An Apartment?

If you are concerned about finding an apartment after filing bankruptcy, there is no need to be alarmed. Because of the housing bubble and financial crisis of 2008, most landlords have experience renting to recently-bankrupt tenants. As a form of risk mediation, you may be expected to provide:

  • a larger security deposit
  • a guarantor for the first several years
  • paystubs or other proof of steady income. 

Admittedly, it’s going to be more difficult for someone who filed for bankruptcy to secure an apartment than someone with perfect credit. But don’t let the fear that you will be locked out of the housing market prevent you from filing bankruptcy if you desperately need to.

Can I Lease a House After Bankruptcy?

It won’t be impossible, but leasing a house after filing bankruptcy will likely more difficult than simply renting an apartment. A recent bankruptcy makes you a financially high-risk tenant, and you should expect to be asked for a hefty security department up-front and be given absolutely no wiggle-room with monthly payments.

If you can afford it, a lease would be a great way to rehabilitate your credit, as the combination of the housing payment, utilities, and the costs of maintaining an independent household would generate far more records than an apartment.

Consider Alternative Housing Options

Unaffordable housing is the largest contributing factor in personal bankruptcies across the United States. If you are in debt because you can’t afford your current housing, perhaps your goal shouldn’t be “How can I find traditional housing again with lousy credit?”  but “How can I find affordable and satisfying housing?”

The answer to that question may lie in non-traditional housing options. Most people think about apartments, rowhomes, and single-family homes as the only options for a stable residence. However, there are a lot of options available that offer affordable, yet still quite livable housing.

Room Shares

One option is to think like a grad student! If you live near any major university, you should be able to find hundreds of room-share possibilities. Sometimes homeowners rent out an unused bedroom to create a revenue stream after their child has left the nest. Other times, young professionals will sublet a room in their apartment to help keep the cost of living. Room shares can offer all the comforts of home, well below market value.

Mobile Homes

If you live in a rural area, you might want to consider mobile homes. Mobile homes have come a long way since the 1950s and the stereotypical airstream trailer on cinder blocks has given way to well-appointed trailers which are nearly indistinguishable from similarly-sized prefab homes and ranchers.

Mobile homes also have the benefit of being classed as a vehicle, not as an improvement on real property. As a result, once you buy the trailer, you will either pay monthly rent or quarterly property tax on a small lot, saving thousands of dollars a year compared with a traditional home of comparable square footage.

Tiny Homes

The Tiny Homes movement focuses on creating fully-functional houses that cover less than 400 square feet. Some are on wheels, others are permanent structures. Also, many rural families have built sustainable homes across the south and midwest from retired missile silos, repurposed shipping containers, and more. These make for excellent options if you are looking to establish a low-cost homestead after bankruptcy.


Veronica Baxter is a writer at assignyourwriter and legal assistant for bankruptcy attorney David M. Offen, Esq. a Philadelphia native who attended Temple University and Temple University Beasley School of Law. Mr. Offen is admitted to the bar in Pennsylvania and New Jersey. He has helped over 8500 individuals and families over more than 20 years of practice, preventing home foreclosure, car repossession, IRS tax levies, lawsuits over unpaid debt, and utility shut off.

About Carson Derrow

My name is Carson Derrow I'm an entrepreneur, professional blogger, and marketer from Arkansas. I've been writing for startups and small businesses since 2012. I share the latest business news, tools, resources, and marketing tips to help startups and small businesses to grow their business.

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