After Bankruptcy Mortgage Refinance is a Very Real Possibility

By David Oliver

It is often thought that after bankruptcy, mortgage refinance is impossible for seven years or longer. This is totally untrue. In fact, as soon as a few months after declaring bankruptcy, you may be able to locate a lending institution that is willing to refinance your mortgage home loan. In fact, post-bankruptcy mortgage refinance can be the best possible move toward rebuilding your credit.

In recent years, bankruptcy laws have changed significantly and many mortgage refinance candidates have no idea whether they should even consider attempting to get their home loan refinanced or if they can apply for any type of credit at all. It is often this fear and anxiety which causes home owners holding mortgages after bankruptcy to avoid looking into refinance options. They believe they are stuck with whatever interest rate they may hold on their home loan and, especially with adjustable interest rate mortgages which are experiencing rising rates of interest, it can be a huge advantage to seek out a lower fixed interest rate home loan by refinancing.

Today, when declaring Chapter 13 bankruptcy, the type for which most home owners in financial trouble quality to apply for today, the court looks at the credit situation. A Trustee is named and a payment plan on those obligations which can not be discharged or cleared through the bankruptcy. Your mortgage, since you are allowed to keep your home, is one of those obligations. Others include your car loan and some credit card debt. Payments are established by the court based on the amounts owed and your income and every month, on the established date or dates, the Trustee must receive payment on these court ordered plan payments.

When a mortgage holder enters Chapter 13 bankruptcy, mortgage refinancing options are available to them after about six consecutive months. The exact time frame differs with various mortgage finance lending institutions. During the six months, the home owner in bankruptcy must have paid to the Chapter 13 bankruptcy Trustee their mortgage payments and other obligations on time every time in order to prove they are sincerely wishing to recover their good credit standing.

The beautiful part about mortgage refinance after bankruptcy is that you use the equity in your home as security against the new, hopefully lower interest rate home loan. The proceeds from the new loan are used to payoff your original home loan. This actually allows you to discharge or free yourself from the bankruptcy and you can really begin the process of rebuilding good credit standings.

Your bankruptcy attorney will assist you in ensuring that the court, upon using your bankruptcy mortgage refinance to pay off your original home loan's outstanding balance, provides you with the necessary discharge paperwork required to get you out of bankruptcy.

Either your attorney or a credit counseling service can help you learn how to use this bankruptcy discharge to cleanse your credit and begin building credit score which will qualify you as a good credit risk, even though you have recently filed bankruptcy. Of course, different creditors have different rules about offering credit after bankruptcy. In all situations, the fact that you have paid off your original home loan after filing bankruptcy, mortgage refinanced your home, and paid your new home mortgage loan payments on time go a long way toward starting you on a road toward a future with shining credit.

About the Author

David Oliver is the founder of FreeBipolarCourse.com, a one-stop source of information on how to cope and deal with bipolar disorder. Sign up for one of his FREE Mini Courses on bipolar by visiting FreeBipolarCourse.com