Is it possible to refinance a mortgage after bankruptcy?

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.