A bankruptcy filing delivers a devastating blow to your credit and FICO score, but it doesn’t mean you have to wait 10 years before you can qualify for a mortgage. Many consumers who have filed for bankruptcy have been able to obtain a mortgage.

While credit card companies may care about what happened before you filed for bankruptcy, many mortgage lenders are more interested in your recovery — what you’ve done since your filing. It won’t happen over night, but here are some tips and things to keep in mind when you inquire about a mortgage with a tarnished credit past:

Give explanations. No mortgage lender is going to ignore the fact that you’ve filed bankruptcy and he or she will likely want to know the cause of the filing. Your lender will be particularly interested in whether the same situation could happen again. Your chances of being qualified are much better if your bankruptcy was caused by a single event such as a loss of employment or a death in the family, than if it was the result of “just spending too much.”

If the bankruptcy resulted from a single event, it is important to show your lender paperwork describing the incident, such as the layoff notice or death certificate. You may also want to bring in court documents to indicate when the bankruptcy was filed.

Demonstrate good money habits now. Many people who file bankruptcy swear off credit altogether, however, it is important to re-establish your credit rating. Get a secured credit card or take on some sort of loan — furniture, a car or a major appliance — to demonstrate that you are able to make timely payments. Make sure you are making other payments (utility bills, cell phone, etc.) on time as well. You won't turn things around in a year but your credit score will improve over time.

Dispute any credit report errors. There’s no need to add to your troubled credit history with errors on your credit report. Get a copy of your credit report from each of the three major credit reporting agencies: Equifax, http://www.equifax.com; Experian, http://www.experian.com; and TransUnion, http://www.tuc.com. If you encounter any errors, inform the CRA in writing what information you believe to be inaccurate and request deletion or correction.

Save your money. Lenders may be more willing to loan you money if you’ve saved up a considerable amount of money for a down payment.

Live within your means.  Think small when the time comes to look for a home. Smaller homes often mean smaller mortgages.

Bankruptcy Reporting Period

The fair credit reporting act allows bankruptcy to be reported for up to 10 years. The key word is "allows" because it is NOT mandatory for credit reporting agencies to report the bankruptcy for the full 10 years. Each credit bureau has its own internal policy on how long it reports any bankruptcy but as a general rule, Chapter 7 is reported for 10 years and chapter 13 for only 7 years.

The reasoning behind this difference in the reporting periods is under chapter 13 you pay at least some of your unsecured debts while chapter 7 relieves you of paying anything thus the longer penalty.

Bankruptcy is reported for 7 or 10 years from the date the bankruptcy is discharged (otherwise known as the "Order of Relief" date) or from the date the bankruptcy case is adjudicated.

Example Chapter 7:
You file bankruptcy on January 10, 2003 and receive a discharge on May 30, 2003. The bankruptcy remains on your credit report until May 2013. (10 years)

Example Chapter 11:
You file bankruptcy on January 10, 2003. You receive confirmation of your chapter 11 plan on March 15, 2003. The bankruptcy remains on your credit report until March 2013. (10 years)

Example Chapter 12 and 13:
The court normally grants the discharge as soon as practicable after you complete all payments under your repayment plan (typically 3-5 years).

So, you file bankruptcy on January 10, 2003 and you begin making payments a couple months later. You complete your repayment plan on March 1, 2006 (3 years later) and the court grants your discharge 70 days later on May 10, 2006. In this case, the bankruptcy remains on your credit report until May 2013 or 2016. (7 or 10 years from the discharge date depending on the credit bureau's policy)

Generally, you don't need to do anything to have a bankruptcy removed from your report once the reporting period expires. However, it's always a good idea to verify that the bankruptcy has been deleted. Find out what the policy of the CRA is (7 or 10 years) and then, if it has expired but not removed, send a letter to the credit bureau requesting the bankruptcy be removed.

What if my bankruptcy case was dismissed?

When a bankruptcy petition (voluntary or involuntary) is dismissed with no entry of an order for relief, it is considered adjudicated and is reported for 10 years from the date of the adjudication.

When bankruptcy information is reported to Credit Reporting Agencies, the provider of the information must include the Bankruptcy Chapter (7, 11 12 or 13), the discharge or adjudication date, and if the petition was withdrawn by the consumer before a final judgment and the date of the withdrawal.

Can debts included in a bankruptcy be reported individually?

Yes! Although most (in some cases all) debts are included in the bankruptcy, they can still be reported individually but must reflect the correct delinquency dates and can only be reported for the 7 1/2 year reporting period while the bankruptcy itself is reported for 10 years.

Section 623 of the FCRA requires furnishers of information to consumer reporting agencies to report accurate (section 623(a)(1)), complete and updated information (Section 623(a)(2)).

When a consumer continues or resumes payments on an obligation discharged in bankruptcy, a creditor may report delinquencies subsequent to the bankruptcy, as long as the information provided to the credit reporting agency is accurate, complete, and updated, in accordance with those provisions. Of course, the creditor is then also subject to the notice and dispute procedures of Section 623(a) and (b) with respect to its reporting.