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Is it possible to refinance a mortgage after bankruptcy?

Author: Jessica Bennet
Community Mentor
Ask Jessica
Posted on: 23rd Dec, 2005 01:24pm
Bankruptcy can indeed be very harmful, strenuous and demoralizing experience. It is very tough and challenging task for you to get out of bankruptcy stains. It has become tougher since the devastating property market crash the country had witnessed in recent past. Though it’s difficult but still it’s not impossible to obtain a mortgage loan after bankruptcy or to refinance after bankruptcy. However, to do so, you have to devise an appropriate financial recovery plan. Here are the guidelines that you need to follow so as to obtain a refinance loan after bankruptcy.

  • Filing for a Chapter 7 and Chapter 13 bankruptcy has different implications. You need to understand the difference between filing for these 2 types of bankruptcies. Generally, Chapter 7 bankruptcy is discharged within 6 months, whereas for Chapter 13 bankruptcy discharge, it takes 3 to 5 years. But, after one year of Chapter 13 bankruptcy case, you may be eligible for refinancing a mortgage.

  • You need to start reconstructing your financial life immediately after filing bankruptcy. You must put in serious efforts to re-establish your credit. Your lender examines your credit report so as to judge your creditworthiness. Anyways, the negative effects of bankruptcy remain on your credit report for several years. A Chapter 13 bankruptcy shows up on your credit report for nearly 7 years and a Chapter 7 bankruptcy stays on your credit report for nearly a decade. However, with some concrete steps, you can get back to solid financial footing. You must pay your bills on time, without fail. You can employ automatic deposit system from your paycheck account to pay the debts. Even by taking out a secured credit card and by making timely payments, you can improve your credit score.

  • You should get an estimate of the current market value of your home. Then you need to compare the current market value of your home with outstanding mortgage balance. In other words, you need to calculate the loan to value (LTV) ratio. If you have got discharge from bankruptcy recently and if your LTV ratio is more than 75%, then it will indeed be very difficult for you to obtain a home refinance loan at better rates.

  • Bankruptcy badly hurts your finances. It depletes your cash reserves. You can increase your chances of getting approved for refinancing after bankruptcy if you can show some cash increases. You can do so by taking a second job, selling a yard or two, selling some items in an online auction etc. If you can show up that you have accumulated some cash reserve, then you may get approved for refinancing even with a recent bankruptcy discharge.

Not all the lenders will be interested to offer you a home refinance after bankruptcy. Anyways, you will surely find out some lenders who will offer you such loans. It is quite likely that the rates charged will be higher than the rates charged for conventional type of refinancing. Anyways, you must shop around so as to find out the best lender.
Posted on: 23rd Dec, 2005 01:24 pm
I filed bankruptcy was declared two years ago. How long will it take to refinance at a lower rate?
I don't think you need to wait too long. Only after six months from the date your bankruptcy was declared, you may find lenders agree for the deal. In the mean time you can look around to make a list of good lenders in the market.
Posted on: 23rd Dec, 2005 01:38 pm

You will be able to go for mortgage refinancing after bankruptcy now although in case of a ch.7 bankruptcy then it will stay on you credit report for 10 years and it will stay up to 7 yrs. in case of a ch.13.

You will definitely find lenders agree to refinance but you may not get it easily as with normal case, and the rate will also not be that lower. Generally lenders agree to give you loan after two years provided you are current on your bills.

You can take the help of a broker to find a suitable lender but do keep your eyes to get the maximum facility.

Some related discussions ( and in our forums may help to understand more clearly.

Posted on: 23rd Dec, 2005 01:58 pm
Anything that may influence my rate and ability?

Posted on: 23rd Dec, 2005 02:34 pm
There are some factors to be considered in case of home refinance after bankruptcy -
  • credit score
  • the difference between the value of your loan and the value of your home
  • is the rate going affordable by you
  • is it worth at all to refinance
Hope I could help you.
Posted on: 23rd Dec, 2005 02:52 pm
you may have taken a lot of debts and failed to cope up with the payments, but even then, you may still apply for a mortgage or a refinance loan. most lenders will not prefer to offer you a home loan when you have filed bankruptcy. they consider it as a great risk to offer you a mortgage which will take up a lot of your cash reserves for its repayment. even then, you will find subprime lenders coming up with loans offers at comparatively higher rates and you have no choice but to accept that.

in general, most lenders won't approve your mortgage refinancing after bankruptcy unless 2 years have passed since you have filed bankruptcy. this will actually benefit you in the sense that you can rebuild your credit history in the meantime. the best way to start off is to take a credit card and make regular payments on it. your creditors will thus be convinced that you can manage small payments.

you will have to maintain good payment habits if you wish to take a mortgage or intend to refinance your previous loan after bankruptcy. taking a mortgage or refinance loan after declaring bankruptcy will help you to re-establish your credit status provided you make timely payments. moreover, with a refinance loan you can obtain a low rate on your existing mortgage and build up your savings.

re-establishing good credit is easier with a chapter 13 bankruptcy, as you already make payments to clear a part of your debt amount. creditors come to know that you are at least trying to pay down your debts. this is not possible with a chapter 7 filing that helps in discharging all your debts and you have to pay for none.

a chapter 7 bankruptcy stays in your credit report for 7 years and chapter 13 gets featured in the report for about 10 years. and, bankruptcy creates a negative impact on your credit report, so that you don't qualify for mortgages at better rates. but if you practice regular payment habits, then getting the best mortgage quotes won't be that difficult. you may take help and support from credit counselors who will be willing to guide you in return for a nominal fee.
Posted on: 27th Dec, 2005 11:07 pm
can i refinance my mortgage waiting only one year and currently in bankruptcy?
Posted on: 28th Dec, 2005 07:44 pm

i think if it is possible you should wait for two years after filing bankruptcy. because after one year if at all you get a lender it will be a sub-prime lender who will refinance your mortgage at higher interest rate. and therefore instead of gaining anything out of refinance you will loose some money.

Posted on: 28th Dec, 2005 08:21 pm
Hi Peanut,

What Jerry says is correct. I would suggest that you wait for at least 2 years of your bankruptcy filing. This will give you some time to improve your credit score and later on help you to avail loans at comparatively lower rates. You will be getting loans from lenders other than subprime lenders and therefore you will be able to avoid paying high interest.

If you can wait till 2 years after your bankruptcy filing, then within this period, I would suggest, that you take a credit card and make regular payments on it. This will help to repair your credit history. And, then you will be able to get refinance loans at lower rates.

Hope that I could help you.

Posted on: 28th Dec, 2005 08:41 pm
hi i have a question here that if somebody is in bk chpter13 and wants to take loan to pay BK off; then what documnets he needsto submit to lender reagrding his bankruptcy bcos normally he doesnt have any docs and all docs stay with his attorney who are not that big help. so whats the best way and what are the docs reqd
Posted on: 28th Jul, 2006 09:16 am

It's not easy to qualify for loans in Chapter 13 Bankruptcy. One to pay higher rates of interest as a bankruptcy has negative impact on his credit score.

While an individual is following the repayment plan in Chapter 13, he should contact any of the credit reporting agencies - Equifax, Experian and TransUnion to update his credit report with the latest payments. This will help him to convince the lender that he has started to build up good credit after filing the bankruptcy.

When he submits the documents, a copy of the credit report should be given to the lender. Even if the documents are with the attorney, one should have copies of documents like proofs of income, past credit payments, assets, etc. All such documents should be submitted to the lender.


Posted on: 28th Jul, 2006 11:08 pm
Yes, you can refinance after a bankruptcy - I can find you a loan 1 day after discharge but the rates are not pretty. Your best case is to have been discharged (goes by the date of discharge not when you filed) at least 2 years for chptr 13 & 4 for chptr 7. Now, if your bankruptcy was due to extenuating circumstances (divorce, job loss, sickness etc.) you will be alright @ 2 yrs with a chptr 7 as long as you have re-established credit and have not been late on anything - remember after a bankruptcy you must remain squeaky clean on your credit & rebuild your credit through new credit cards (keep your balances below 35% of your credit limit!) & car loans etc.

[Promotional text deleted as per forum rules. Thanks.]
Posted on: 27th Oct, 2007 12:57 pm
need a mortgage .bk is one and half years old???
Posted on: 12th May, 2008 11:07 am
Hi debra,

Welcome to the forum.

Have you filed chapter 7 or 13? Can you please inform us about your credit and employment history so that we can advise you better?

Do you have enough savings to pay the down payment and the closing costs? How much do you want to borrow?

Hope you get the information soon :)

Best of luck,
Posted on: 13th May, 2008 02:38 am
my rate adj this year and i want to refinance at lower rate dischge feb 2008 from chpt 7
Posted on: 19th Aug, 2008 10:37 am
Hi Collen,

Since you have received the discharge in February 2008, you'll have to wait for some more time till you get a favorable rate on your loan. Otherwise, you may be able to get a refinance loan at higher rates of interest. And if you credit is too bad, then you may not even qualify for another loan right now. I suggest you talk to our lender about it first and find out what rates and terms he's offering. Then you can look out for some more offers from other lenders as well. But frankly speaking chances of getting a loan are feeble.

You may also send in your request for no-obligation free mortgage quotes from the lenders in this community. Let's hope they'll be able to help you out with a suitable loan offer.

may god bless you.

Posted on: 20th Aug, 2008 10:36 am
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