When you file for bankruptcy, you are going to be making payments on your home and other debts, you may wonder how you can continue to comfortably make these payments to stick with your bankruptcy plan. For many individuals that are undergoing a chapter 13 bankruptcy, refinancing a mortgage is often a necessary choice. What is important before you go ahead with refinancing your mortgage, is that you understand that loan type and the restrictions you may face based on the type of bankruptcy that you filed for. Bankruptcy and refinancing, what are the best options for it?
If you file for Chapter 7 bankruptcy it’s likely that you will have to wait a longer period of time before you’ll be able to refinance. If you are under a Chapter 13 bankruptcy, you may qualify for a government-backed mortgage one year after applying for the process. Loans which are backed by the government such as VA and FHA have a waiting period of roughly 2 years after the discharge process. A conventional loan will have a waiting period of four years after you discharge your chapter 7 bankruptcy, and you’ll only have a two-year waiting period for a conventional mortgage loan for refinancing after a chapter 13 bankruptcy discharge. If your chapter 13 bankruptcy was dismissed, you’ll have to wait for years in order to refinance your mortgage.
There are some ways that you can reduce these waiting periods but what many people choose to do during these times is work at rebuilding their credit before they consider financing options. Taking steps to rebuild your credit can often help you to qualify for a lower interest rate when the time comes for you to refinance.
If you’re only considering filing for bankruptcy and you’re not involved in an active case, it could be wise for you to consider how filing could affect your finances in the future. Filing for bankruptcy today could mean that you have to wait for a few years until you can look for the loan for auto financing, home financing, personal loans and more. Choosing the right type of bankruptcy could help to make sure that you reduce the total amount of time that it takes for you to recover and for you to start with a new loan. Taking advantage of the time in which you cannot qualify for a mortgage or loan by choosing a secured credit card can be an excellent way that you can save money when you finally do have the status to use loans or financial products like mortgage refinancing. Steps towards rebuilding your credit and demonstrating that you can use a secured credit card will help you throughout the bankruptcy process.
Making sure that you follow the repayment plan with your Chapter 13 bankruptcy is also highly crucial. Once an agreement is in place for your Chapter 13 bankruptcy, make sure that you are making regular payments and that you are not in danger of defaulting on payments towards your agreement. When you start to miss out on payments, your agreement could be stopped and this could lead to the chance that you will be unable to qualify for a loan in the future. Sticking to your repayment plan will make sure that you can qualify for loan options faster later on and that you can enjoy a faster repayment period for your bankruptcy.
As well as sticking to your repayment plan, you’ll also need to consider avoiding lenders who are offering refinance options that seem faster than normal guidelines. There are multiple subprime lenders that have extremely high interest rates that you can still qualify for after a bankruptcy. These lenders are able to offer you financial products because they charge a higher interest rate and incur a larger risk by taking on clients with a history of recent bankruptcy. Lenders who are offering refinance options shortly after your bankruptcy will often put you deeper in debt because of the extra cost of the loan. Choosing these options is not often a wise choice as it could further damage your credit rating or put you into a difficult financial situation that will result in another bankruptcy within a few years. It’s often a far better choice to sit through the waiting period rather than incur higher costs and choose a lender that will simply offer you the funds up front.
If you are going to be undergoing bankruptcy and you also like advice on refinancing your mortgage or qualifying for other types of financial products, you should consider speaking with a professional bankruptcy attorney today. Speaking with an attorney will help you to understand what your options are and how bankruptcy will affect your refinancing process. Being informed about the state of your bankruptcy and how it will affect your financial future can be important to maintaining a strong financial plan for your future. Contact us today for more information!