Bankruptcy isn’t the End of the Road

Life threw you some lemons, and you filed for bankruptcy – so what? Many people think bankruptcy is the end of the road, but it isn’t.

Maybe you tried to refinance after you filed, and you were turned down. I see it all the time. The reality is there is a relatively short period after your bankruptcy where you can’t get financing. And most people that file end up with a better credit score after the dust settles.

Take Sandy for example. Several years ago, Sandy had a business that went south during a market downturn. Her best option was to file for bankruptcy. That was six years ago. After the bankruptcy, she had improved credit scores and no debt, but she still had an adjustable-rate mortgage.

Sandy now had a 700 credit score. Refinancing the mortgage would be easy. Since the mortgage was included in her bankruptcy, she was told she was ineligible to refinance. This is false. The truth is if you include your mortgage in your bankruptcy you need to have the debt re-affirmed, which a bankruptcy attorney would never do. You’re not eligible for a conventional loan when the debt is not reaffirmed, however, you can reaffirm the debt using an FHA loan.

In Sandy’s case, we were able to take her out of her adjustable-rate mortgage, which had shot all the way up to 9.5%. It saved her thousands of dollars, and she is back on solid ground.

You never know what life is going to throw at you. Get with a mortgage advisor that can walk you through it all.