Mortgages and Bankruptcy

A dozen different bankruptcy attorneys send their clients to me, that own an existing home or will want to own a home in the future. The sooner that I can begin working with these folks, the sooner they can begin the process of education and healing their credit profile. Not easy for many, there is shame, fear and uncertainty.

At one time, it was a rare occurrence, but certainly not the case over the last few years. There is so much bad information out there, much of it shared by friends, family and professionals all with good intentions.

I recently did a refinance for a couple that were in a chapter 13 bankruptcy. Both of them had lost their jobs at the same time. Both eventually got new jobs, in their same fields, but the damage had already been done, on their mortgage payment and credit card obligations.

They were making $1,200 mortgage payments and $950 payments to the bankruptcy trustee. The payments had been made on time for over a year. Fortunately, they had sufficient equity in their home, so doing a refinance was possible. We did a $203,000 mortgage at 3.75% for 30 years, their new mortgage payment was $1,493 per month.

A loan like this can be time consuming, as we had to deal with an incorrect credit report, verification's for the existing lender that the payments have been made on time, since the bankruptcy and that the chapter 13 payment have been made on time. Fortunately, all these things were good.

So many view bankruptcy as the kiss of death, I can assure you, it is not a permanent condition.

This article explores the question, "Will I be able to get credit, after filing bankruptcy?"

There Is Life after Bankruptcy

By: Mitchell Reed Susman