Consumers are of the opinion that once that after filing bankruptcy, it spells the end of the road for them. This however is not true. There is life after bankruptcy and it can be full of the same if not similar opportunities prior to filing for bankruptcy. [...]
Consumers generally tend to be of the opinion that once an individual has been declared bankrupt, it spells the end of the road for them as far as new credit contracts are concerned. This is not quite true. Nowadays it has become much easier for an individual to obtain an after bankruptcy home loan. However it must be remembered that there are a few factors you should consider prior to applying for a new home credit loan.
Getting A Home Loan After Bankruptcy
At the very outset you should remember that once you have been discharged from bankruptcy it is best to wait for at least 2 years prior to applying for a bankruptcy morgage loan. If however you do decide to apply for a after bankruptcy home loan prior to the 2 year gestation period, ensure that you have flawless repayment history and that all your contractual obligations associated with the bankruptcy have been paid and are up to date. Once the 2 year wait period is up it is fairly easy to get a bankruptcy mortgage loan and in certain cases you can even get up to 100% finance. Lenders when considering bankrupt client applications look at the following things:
- Repayments history post discharge from bankruptcy.
- Timely payment of all financial obligations related to the bankruptcy, especially government debt if any.
- Source of deposit for property.
- Employment and stability of income.
These are a few things which lenders keep a close eye on. One thing that you might have noticed is that lenders nowadays are very particular about the source of the deposit on the property. This is particularly important owing to the fact that in the past clients have tried to defraud banks when getting a home loan after bankruptcy by misstating the source and details of the deposit. If your bankruptcy mortgage loan deposit is from a relative, the banks might need you and your relative to get a signed statutory declaration stating that the funds are a non-repayable gift. This is done so that the bank is satisfied with the source or else it will also constitute another loan or credit contract.
Home Loans With Bankruptcy – Tips
Applying for an after bankruptcy home loan is not the same as applying for a regulr home credit loan. Listed below are a few tips to help set yourself up well for home loans with bankruptcy, after you have been discharged from bankruptcy. This should ensure that you are in a good position while applying for a after bankruptcy home loan.
- Budget: One of the most important things post bankruptcy is budgeting. Take into account all of your fixed overheads. Then take your income and subtract your expenses from it. This will give you a residual surplus which you can use to start a savings pattern or use to reduce bills faster before you apply for an after bankruptcy mortgage loan.
- Rectify Mistakes On Your Credit Report: Quite often consumers emerging from bankruptcy find that there are still a number of accounts which appear as delinquent, overdue or open on their credit reports when in fact these should actually be closed and are credit report errors consumers are often unaware about. Take these issues up with the appropriate credit bureaus and try and resolve them as soon as is possible. This will ensure that your credit report looks a lot healthier when applying for a home credit loan.
- Apply For Small Chunks Of Credit: By applying for small amount of credit you will put yourself in a position to repay these small loans like car loans and personal loans a whole lot sooner and thereby build your repayment history and increase your credit score. This will work in your favour when applying for a bankruptcy mortgage loan.
- Use Your Credit Card Sparingly: Having a credit card and using it only as required is another way to build up your credit score as discussed in the post about credit card balances. When you use your credit card sparingly and pay out the credit card debt in full each month, this adds a lot not only to your credit score but also your repayment history, making it possible for lenders to trust you when you apply for a bankruptcy home loan.
Consumers must remember that your bankruptcy might be on your credit report for a period of 10 years, but it will not be there forever. It will eventually come off and your credit report will go back to being normal. It is prudent to ensure that all your bills are up to date and that you are trying to build your credit report every step of the way. With these simple steps consumers who have just been discharged from bankruptcy should have no problem applying for an after bankruptcy home credit loan.
References:
- Bounce back fast after bankruptcy – MSN Money
- Personal Loan after Bankruptcy - The Dolar Stretcher
For consumers struggling with their existing mortgage a mortgage refinance might be an alternative to bankruptcy. Most credit consumers have experienced changed circumstances over the years and the mortgage which suited you then might no longer be the option. Under changing and extremely difficult financial conditions mortgage refinancing might just be the best alterative to save you from bankruptcy.
Refinance Your Mortgage For Better Credit Report
Consumers are sometimes misled and often believe that bankruptcy is a whole new start. While this is true, one should remember that declaring yourself bankrupt, comes with a lot of repercussions and bankruptcy affects credit reports as stated below:
- For starters, your FICO score gets affected negatively by anywhere between 240-280 points owing to the fact that bankruptcy is a matter of public record.
- Secondly clients who have been declared bankrupt find it very difficult to obtain credit and even if they do it is at a much higher interest rate.
Hence in light of these facts a mortgage refinance might just be the saving grace and one of the best alternatives to bankruptcy.
Alternatives To Filing Bankruptcy
Bankruptcy is not the only solution to manage mounting debt and there are some alternatives to filing bankruptcy that will not affect your credit report as badly. Listed below are a few alternatives to bankruptcy:
- Refinance A Mortgage To A Lower Rate: If you are still in a product or with a lender offering a higher interest rate than the market place, it might be time to shop around and look for a lower interest rate for a mortgage refinance. A lower interest rate means lower repayments.
- Mortgage Loan Refinance And Debt Consolidation: If you have more than one property and are struggling to keep up with your repayments, a mortgage loan refinance and debt consolidation might be a good idea. Consolidate your two separate mortgages into one facility and make one repayment on them. This usually also enables customers to make lower repayments owing to the single facility being larger and is an excellent bankruptcy alternative.
- Line of Credit: This is a very powerful mortgage tool. This is much the same as using a checking account. The client is granted an overall account limit and can draw down from the mortgage loan as and when required. You only pay interest on the drawn down amount or the used amount.
- Obtaining Cash Out: This type of a mortgage refinance will allow you to use the lazy equity in your mortgage loan. The diagram explains what lazy equity is.
In this example the consumer can get a loan of up to 80% of the property value, i.e. 480,000 without having to pay Mortgage Insurance. Hence the client can use the additional 30,000 as per the client’s discretion. People often use the cash out component to pay off bills, credit cards and to create buffers in their mortgage account.
Using a mortgage refinance is a great alternative to bankruptcy as a well managed mortgage loan improves your credit report rather than the damage bankruptcy causes. However, there is one more alternative to bankrtupcy as well:
- Filing For A Chapter 7 or Chapter 13: Clients can sometimes file for a chapter 7 which is commonly known as liquidation as alternative to bankruptcy. This does not disqualify a client from obtaining a mortgage refinance as long as 2 years have passed since the client was discharged of the bankruptcy. On the other hand if the client files for a chapter 13, he/she can still obtain a mortgage refinance as long as the payments in relation to the mortgage and the bankruptcy have been made on time.
In a changing credit environment, consumers can no loner rely on the “one size fits all” principle. It is essential that clients reassess their situations and are full aware of all bankruptcy laws before making a decision. As as an alternative to bankrtupcy, one can refinance mortgages out of their present financial institutions and on to cheaper rates and solutions. This could be the ideal alternative to bankruptcy and helping you maintain a blemish free credit report.
Reference:
1. Could Mortgage Refinance Help You Get Out Of Debt? – Legal Helpers
While bankruptcy is often a fresh start for debtors it is not free from consequences for your credit score rating. Prior to filing for bankruptcy it is essential that consumers fully understand their legal position and obligations and the effect of bankruptcy on their credit report. Bankruptcy should be considered only as last resort as it could have a major impact on your credit score rating and if possible, a bankruptcy alternative should be considered. [...]
In a lot of adverse circumstances consumers have no choice but to file bankruptcy to improve their credit report. This is also a way in which a consumer can start afresh. In a situation where the consumer is over burdened by debt and there is no way out, an individual may legally file for a bankruptcy as per the United States bankruptcy law.
Declaring Bankruptcy: Legal Definition
Declaring bankruptcy may be defined as “The legal inability to pay debt” or the state where a person is legally declared bankrupt according to bankruptcy laws. Simply stated when the debts of a consumer are far exceeded by his/her income/assets an individual is considered to be bankrupt and needs to file a bankruptcy.
File A Bankruptcy – Types of Bankruptcy
If your credit standing is irreparable even after debt consolidation, debt counseling and other kinds of credit help, you may have no other option but to file for a bankruptcy. You should know that the most common types of bankruptcy as laid out by bankruptcy laws are:
- Voluntary: This is also referred to as a Debtor’s petition. When an individual or organisation owes another money, he/she may either enter voluntary bankruptcy or may file a debtor’s petition to file a bankruptcy. On the acceptance of this petition the individual is automatically declared bankrupt.
- Involuntary (Creditors Petition): If the amount owing to a creditor exceeds $2,000, they may join with other creditors in an attempt to declaring bankruptcy of the individual. In order to do this the creditor must first obtain a judgement from the court and then apply to the official receiver to issue a notice to the debtor demanding payment within a set date (usually 21 days). If the debtor fails to do so then the creditor can appeal to the Federal Magistrate court asking for the debtor to be declared bankrupt.
Bankruptcy Law: Declaring Bankruptcy Facts
In general, bankruptcy gives honest debtors a new start and helps them rebuild a credit report from scratch when they file a bankruptcy. However, it is advisable to think carefully before filing a bankruptcy as it has many repercussions. The following are a few characteristics of the laws of bankruptcy:
- Bankruptcy law is a federal law and is contained in Tier 11 of the United States code. The states have no regulation over this.
- Filing for bankruptcy allows debtors a chance to resolve their debts.
- Declaring bankruptcy allows debtors to be freed from all obligations once their assets have been distributed even if their debts have not been paid in full.
- Bankruptcy law allows for the interest of all creditors to be treated with a certain amount of equality.
- In certain cases the bankrupt debtor may continue to remain in business and may be allowed the use of the revenue generate to dispose of his/her debts.
- Bankruptcy cases are litigated in the US bankruptcy courts.
- Bankruptcy is of 2 types, i.e. voluntary and involuntary.
Declaring Bankruptcy: How To File Bankruptcy
The process of filing a bankruptcy starts with the filing of a petition with the Bankruptcy court. This further gives rise to a bankruptcy estate which includes all the assets and liabilities of the person filing for a bankruptcy. The taxation obligation may vary depending upon on the chapter under which the bankruptcy petition was filed. When a debt is owed to a person and is cancelled, the cancelled debt is usually treated as income and adds to the tax obligation of the individual. However if the debt is cancelled when filing for a bankruptcy, the debt is not taxed but would in turn reduce the tax benefits the individual would otherwise be entitled to.
A credit report holds an important place in the financial life of a person. It is important as a decision base to undergo several financial matters. Earning good FICO scores is important to gain financial benefits like taking loan, applying for a job, going for business partnership, purchasing an insurance policy, renting a home and making purchases in installments like property and vehicle. It is crucially significant to keep yourself up to date in financial affairs.
Otherwise, conditions get worse and things go out of hands when timely payments are not made and matters are not efficiently responded. In the real estate matters when payments get delayed and are piled up in a heap, they become troublesome resulting in the shape of foreclosure and short sale.
Those can well realize the importance of credit score who are looking forward to get some loan approved. Your credit score is a mathematical figure that helps to determine your eligibility for some loan and it is also used to decide the amount of credit you can receive and what should be the interest rate. These credit scores are generated by analyzing your credit report. Fair Isaac is the company that generates these scores and that’s why these scores are also called FICO scores. If your FICO scores are sound, it will be quite easier for you to qualify for some loan and get lower interest rates and contrarily, if your fico scores are low, you may not be able to qualify for some loan or if qualify, you may have to pay higher interest rates. It is quite important for your financial well-being to leave no stone unturned to improve your credit score and you can do so by giving utmost attention to your credit report. How is there that don’t need loan in such credit crunch and creditors like to give those who can return and it’s your credit scores and credit report that reveal whether you can pay them back or not.
Credit Report holds an important role in financial life as well social standing. Late and delayed payments can damage a credit report to a large extent. It can be a big hurdle in banking matters, taking loans, applying for a job, applying for an insurance policy and taking a home for rent. To have a better social standing, it is important to maintain a good credit report by timely payment schedule. This can be done by keeping a record of all the payments and not ignoring any bill and information regarding a delayed and awaited payment.
These late and delayed payments decrease the credit score in a credit report and are generally referred to as red marks. Payments that are not paid on time or are not in accordance with a particular agreement are also known as derogatory items or a derogatory credit report on the whole. There are many things that include in making a credit report a derogatory credit report. Failing to pay for the opened accounts and letting them become delinquent is considered to be the sign of a person’s irresponsive nature and a habit of dishonoring commitments.
A good and positive credit report is important to create a good say in the economical sphere. Green marks in a credit report earn high credit scores. Such a report is helpful in earning credibility and loan from lenders. That is an important thing if you wish to start a business or want to purchase an item of high requirement.
What to do if a black mark appears on your credit report as a result of a missed payment or a delayed payment. It’s a terrible thing to have onto a credit report. First, one should do the utmost effort to avoid from such a situation. If by chance, such a thing happens, then start finding the solution to resolve the problem and get off those items from his credit report.
This method is also known as ‘Credit Repair’. It’s been offered by many organizations that they can help you do the required task. You can do the needful yourself too, provided that you are proficient in financial matters. It must be know beforehand that it is a time taking work and needs full attention.
People, who are trying to reconstruct their credit, know well how difficult and frustrating it is. It is your credit score that represents your good or bad financial habits One of the biggest contributing factors for poor credit are late payments and in most of the cases your only option is to wait. But still you can do some things that can prove quite helpful to take off late payments from your credit report.
In the credit report late payments are listed as 30-60 or 90-120+ days late. If you are considering eliminating these late payments on your credit report, you must focus on eliminating 120+ late payments first because such payments quite seriously impact your credit score.