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Depending on your specific circumstances, there are loan programs that will provide up to 100% financing after bankruptcy.
Having a bankruptcy on your credit report does not mean you can't buy a home. Believe it or not, those who have gone through bankruptcy are actually encouraged to find ways to build credit by taking on debt.
If you are still making payments to a chapter 13 BK and you have a fair amount of equity in your home you may qualify for what they call a bankruptcy buy-out. This is where you refinance your home and use the cashout money to pay off the BK. This is done quite often and has to be approved through the bankruptcy courts. This is a fantastic way for someone to pull themselves out of BK and start their life over again.
Bankruptcy - Commonly abbreviated as the two letters BK, Bankruptcy is a legal protection afforded by court proceedings intended to provide relief to an individual or business unable to repay its debts.
Most non-prime mortgage lenders have loan programs to help homeowners who have filed bankruptcy. Many even offer loans to those who are only one day out of bankruptcy.
For individuals, Bankruptcies come in two common varieties:
Chapter 13 Bankruptcy
Chapter 7 Bankruptcy
Chapter 13 Bankruptcy reorganizes debts under the supervision of a court ordered repayment plan. This is commonly referred to as a wage earner plan. Part of the individual's income is appropriated every month for distribution to their creditors.
Chapter 13 allows the individual to save and keep their property, and very often provides 3 to 5 years to repay debts.
Chapter 7 of the Bankruptcy Code provides for liquidation of an individuals non-exempt property, which may include the primary residence of the individual.
Recently bankruptcy laws have gotten more strict. If you have equity in your home you may want to consult with us to assist you with avoiding bankruptcy.
Bankruptcy - A federal law Whereby a persons assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.
Although you can get a loan one day out of Bankruptcy you will have to have some open trade lines that show your ability to pay debt on time for a certain period of time.
After filling a bankruptcy it is important to re-establish good credit as quickly as possible. One of the ways you can start to improve your status after the discharge is to check with the 3 credit repositories and be sure the accounts you included are showing the correct status of included in bankruptcy vs just delinquencies, collections and charge-offs.
In some cases as a property owner you may be able to refinance as an alternative to filing for bankruptcy. If you have sufficient equity you may qualify for a home equity loan or cash out refinance of your primary mortgage. The money you receive from refinancing can be used to pay off debts to avoid filing for bankruptcy. If you are considering bankruptcy you should consult a lawyer as well as a mortgage broker to discuss which option is best for you.
Most people probably assume that obtaining a mortgage to purchase a home, refinance or to consolidate debt after a bankruptcy is out of the question. In fact, many people are able to obtain these mortgage services, even 1 day after a bankruptcy discharge in some cases.
The main two types of bankruptcy for indiviuals to file are chapter 7 which will erase all debt included in the bankruptcy. second there is chapter 13 this will restructure the debt and give the person a certain payment and time period to repay the debt.
Chapter 7 - Gets rid of all debts except some taxes and possibly alimony payments. Liquidates all assets that are not exempt (cars, work-related tools and basic household furnishings). Some property may be sold by a court appointed official or turned over to creditors.
Chapter 13 - Allows a borrower with a stable income and limited debt, to pay off bills under a court approved repayment plan over a 36 to 60 month period rather than surrender any property.
If you are having problems getting credit or paying your monthly bills, you may be tempted to turn to businesses that advertise quick and easy solutions to credit problems. But do not be misled. There are no instant solutions. Although some credit counseling businesses "guarantee results or your money back," you may find that there are hidden strings attached or that the company is gone when you want your money back.
There are steps you can take to help solve your credit problems. However, solving them takes time, patience, and some understanding of the law. This brochure may help you. It explains why your credit history is important, how to build a credit history and establish credit, and what can be done to improve a bad credit history. It also suggests ways to help deal with debts you may have, possibly by using a nonprofit Consumer Credit Counseling Service.
On October 17, 2005 the bankruptcy laws underwent a change, the biggest change is that fewer people will qualify for Chapter 7 bankruptcy.
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.
If you have a reasonable amount of equity remaining in your home, it is very often possible to consolidate not only your current mortgage but also any other debts such as car loans and other bills in a Chapter 13 Bankruptcy mortgage.
Bankruptcy, generally in consumer home financing refers to these types Chapter 13 and Chapter 7. A Chapter 13 bankruptcy allows the consumer to schedule a repayment plan of debt, this process of repayment is usually scheduled for a 3-5 year period. The payment process and scheduling is set by the court and managed by the appointed trustee. A Chapter 13 bankrutcy can be paid off through a refinance of an existing mortgage, this is called a bankruptcy buyout. Lending Institutions have strict guidelines in being approved for a loan of this type. A Chapter 7 bankruptcy however can be viewed as consumer debt liquidation. This allows the bankruptcy court to liquidate or sell some of your property for the benefit of the creditors. Generally a Chapter 7 bankruptcy takes about 4 to 6 months from start to finish. Both types are functional for lending institutions and consumers can still qualify for a home loan.
Even though you will not be able to get a conforming mortgage for a minimum of 4 years after the discharge of your bankruptcy, there are now more choices than ever if you have had a bankruptcy in the past.
Although bankruptcy can be damaging to your credit, you can technically get a mortgage loan 1 day out of bankruptcy!
Bankruptcy laws serve two purposes. One, the bankruptcy law gives creditors some payments, if a person can afford to pay them. Second, the bankruptcy law gives people a fresh start, by removing many of their debts, by court order.
AFTER BANKRUPTCY: APPLYING FOR CREDIT - Many people who have filed bankruptcy in the past apply for credit the wrong way.
They fill out a credit application and hope for the best. Best case, they probably end up paying a lot more in interest and finance charges - hundreds or even thousands of dollars more, depending on what theyre buying.
That said, in this article we are going to talk about the RIGHT way to apply for credit and loans. So what is it? Well there are three steps:
1) Learn how to increase your credit score
2) Know the credit approval process
3) Know how to apply for credit and loans
Now, you want to get all three of these steps right. Not just one or two, but all THREE! See if you miss one, or don't do it just right, you can end up paying $100s, $1,000s or $10,000s in additional interest and finance charges.
Here are the three steps in more detail...
Step One: Learn how to increase your credit score.
Increasing your credit score is a key factor in lowering the interest rate you pay on loans and getting approved for them as well. Unfortunately, there are a lot of myths out there that can actually hurt your credit score.
There a number of ways to increase your credit score. One way is to watch your credit card balances. Lenders don't like to see them go above 50% of the available credit limit.
For example, if you have a credit limit of $3,000 and you're current balancing owing is $1,800 (60%) that can hurt your credit score. In this situation, there are two ways you can fix the problem.
First, of course, is to pay the balance down so that it's less than 50% of the credit limit. The other way is to get a credit limit increase:
If you can get a credit limit increase to $5,000 that will means you will be at less than 50% of your credit limit ($1,800 balance versus $5,000 credit limit). And you didn't have to pay down the balance by a penny!
Another way to increase your credit score is to add years of positive credit history to your account. Most people don't know about this and it's 100% legal. But that's another article in itself.
The point I am trying to make is that there are a number of strategies you can use to increase your credit score. Best of all, many of them can be implemented quickly and easily.
Step Two: Know the credit approval process
What do potential lenders look for? Here you need to know the questions to ask. For example, do they work with people who have had a bankruptcy in the past? What is the minimum credit score they want to see? These are just the initial questions.
There are a number of other questions. There are also a number of items that send up red flags if a lender sees them on your credit application - ones that could jeopardize your chances of qualifying for the loan or cost you more money in interest.
Another factor when applying for credit and loans is timing. You don't want to apply for credit and loans until you've increased your credit score (most people make this mistake).
That brings us to step three...
Step 3: Know how to apply for credit and loans.
Knowing which lenders to approach and how to negotiate with them is also really important.
Apply for a loan or credit with the WRONG lender and you're practically guaranteed to be turned down; or, you end up paying a pile of interest.
Then there's there is the negotiation process. This especially important when you're buying a car - for example, people will spend a lot of time negotiating the price of the car they're buying and the value of their trade in (if they have one) - and STILL be taken advantage of. They don't know how to REALLY negotiate for a car.
Think about it. How often do you buy a car? If you are like most of people it's probably once every so many years. Now, how many times a day do you think a busy car dealership negotiates with buyers? Multiply that by weeks, months and years and you can see that they have slightly more experience.
You should now have an idea of the RIGHT way to apply for credit after bankruptcy. Though I wasn't able to go into detail on ALL of the strategies you can use to increase your credit score and qualify for credit and loans at more reasonable rates this should at least give you a starting point.
Refinancing your mortgage after bankruptcy and making timely payments can help you rebuild your credit to potentially higher levels than even before your bankruptcy within as little as two years.
After a bankruptcy, it is important that the consumer re-establish his/her credit. This is accomplished by opening credit accounts and using them responsibly, avoiding any late payments and high balances.
How a borrower has re-established and used credit after a BK is one of the primary considerations of the lender when deciding to approve a home mortgage to a borrower with a past bankruptcy.
One way to obtain a credit card if your credit scores won't allow you to qualify is to apply for what they call a secured credit card. You can get this from your local bank. In this case you would put up $100 dollars as a safeguard to allow you get a credit limit of $100-$200. Only use this for items you would normally buy such as groceries and pay it off every month. This will give you one open trade line. You may need a few open tradelines to qualify for a mortgage.
Bankruptcy laws are always changing and may or may nor affect your current living situation. Always consult a professional regarding the ramifications of filing bankruptcy.
Even though the credit card is secured by your own funds it is very important that you make timely payments. Any late payments after a Bankruptcy will severely limit your options.
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