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Can you refinance after bankruptcy?

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Many people who have filed bankruptcy know little about the process. Often times debtors are unaware of their options in a chapter 13 because they rely on their attorney; their attorney has a fiduciary relationship with the debtor. A bankruptcy attorney's job is to know bankruptcy law, not the mortgage business or their guidelines. When a debtor files a BK 13 their main concern is having an automatic stay placed on a mortgage, collection, etc. To save their home from foreclosure. When entering into a plan the debtor, usually has no exit plan other than paying the 5 or 3 year plan (contingent upon median income). The debtor can refinance after 36 months (all unsecured claims become dis-chargeable debt) and discharge the bankruptcy immediately. This saves the borrower 2 years on their credit report. After refinancing, the BK 6 months out/discharged Fannie Mae will issue approvals. A bankrupt borrower can easily be transformed to an AA+ 680-720 FICO borrower yielding rates in the range of 6.25-7.00 after doing a loan to discharge the bankruptcy.

In a dismissed bankruptcy a foreclosure bailout out loan can be arranged. This topic was discussed in a previous article I published in When a debtor is dismissed from his/her bankruptcy the mortgage ALONE can be refinanced and a Chapter 7 can be employed. When filing a Chapter 7 the mortgage must be refinanced first. I arrange foreclosure bailouts for people more frequently than previous years. When trustee or mortgage payments are missed the bank will make a motion to lift the automatic stay. This leaves the borrower exposed to foreclosure until the mortgage is refinanced. If the borrower meets the means test the non mortgage/secured debts can be discharged under a Chapter 7 Bankruptcy. The "means test" is when the court determines a debtors filing to be abuse of the system. Abuse is presumed if the aggregate current monthly income over 5 years, net of certain statutorily allowed expenses is more than $10K or is 25% of the debtors unsecured debts, as long as the amount is $6,000. The debtor can rebut this guideline with mitigating circumstances. A dismissal from a bankruptcy has been viewed by the court as mitigating circumstances.

When the payments to your trustee are not perfect you can still get out of your bankruptcy. If the debtor has filed multiple Bankruptcies it is important for debtor to know what claims are listed in schedule D & F (secured and unsecured claims) Often times when multiple liens are present the attorney will file an avoidance on a lien. This means the borrower is not required to pay the lien back. However, all too often title searches find liens that were never discussed or filed. Liens that maybe very old.

An unscheduled debt most of the time will not be discharged with a BK payoff because the claim was omitted or an avoidance was never filed. This is a common omission/oversight that can (depending on the amount of the claim) present a problem for a borrower who may not have enough equity to cover the lien.This is where having a through attorney pays off, you most likely wont have to deal with this predicament. Often times I can negotiate these debts down if they are addressed ahead of time.

Yes. You may have trouble finding a lender, but it is possible. If you refinance before your 37th month of bankruptcy, then you will be responsible for repaying the unsecured debt that you filed for. If you can hold out till the 37th month you can refinance and not be held responsible for that back debt. You can have the lender refinance all of your current debt, this includes your filed bankruptcy that your currently paying on through your trustee and the unsecured debt that you had discharged as well as new debt. (This advice was given by a lawyer that cleared one user's Chapter 13.)

Here is more input and advice from others:

  • You can refinance with an FHA mortgage one year after filing a Ch. 13 and showing proof that you were paying your Trustee Payments AND Mortgage Payments each month (be careful that you don't confuse being CURRENT with paying ON TIME).
  • I am a Mortgage Loan Consultant and I have made it my area of expertise in working with people with bankruptcies, bad credit, and foreclosures. Firstly you do NOT have to wait 2 years to refinance after a chapter 7 discharge, those are for Fannie Mae loans. You can refinance a chapter 7 a day after discharge. A chapter 13 can also be refinanced before discharge since it's on a payment plan for 3-5 years from filing date. You can get a chapter 13 refinance as little as 12 months from filing, not discharge and you can payoff your chapter 13 in the process if you have enough equity in your home. There are major differences between a chapter 13 and chapter 7 refinance but that is for your mortgage broker to be aware of.
  • I am a loan agent in California and yes, you can refinance after chapter 13 or during 13 and one day after 13 or 7. A low Fico should be OK. You will need a specialized broker who understands how to do navigate this problem.
  • Be careful. Each situation is different in the bankruptcy refi world. People can be refinanced at anytime before, during or after 13 and the day after 7. There is a thing called BK avoidance loans as well.
  • I am a Sr. Loan Consultant in NY. There are other contributing factors but you can surely refinance even a day after you file. Your FICO score will determine your eligibility your Loan To Value has to be below 70% though.
  • You can refinance after or during a bankruptcy or foreclosure at any time.
  • The answer is Yes you can refinance after a bankruptcy. How soon after? This answer depends on the loan company. Some loan products does not allow bankruptcies while there are other products that allow a bankruptcy discharge up to the day prior to funding. Having a bankruptcy within the past 2 years usually means that you will be categorized as a subprime borrower, meaning higher interest rates and higher loan costs. I know this personally because I work for the #1 online mortgage lender in the country. Also, I run two credit related websites that deal with bad credit.
  • You can refinance during or after your ch 13 and 7 BK's with a sub prime mortgage lender. I am a sub prime mortgage lender who specializes with people who are in Foreclosure and/or Bankruptcies with low credit scores who have at least 30% equity in their home.
  • Yes, if your current bankruptcy attorney is not aware of how to refinance you out of your bankruptcy, talk to another attorney.
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