Mortgage Options After Bankruptcy

If you are unable to meet your financial obligations due to unforeseen circumstances and you do not expect your financial situation to improve, bankruptcy may allow you the legal option to be discharged from your financial obligations. Many bankruptcies are caused by one-time occurrences, such as: job loss, unexpected excessive medical bills, and divorce. There are strict guidelines for mortgage financing after a bankruptcy. Individuals who have had a bankruptcy mistakenly think that they will not be able to qualify for a mortgage or to refinance their current mortgage, but depending on the type of loan, an individual may qualify in as little as one year after filing for bankruptcy. When applying for a mortgage, lenders look at several other factors besides credit scores, these include: down payment, employment history, and debt ratio.

There are 2 types of personal bankruptcies in the United States Bankruptcy Code; they include Chapter 7 and Chapter 13. The following is a brief description of each bankruptcy type and the waiting period to qualify for a mortgage.

The most common type of bankruptcy in the United States is Chapter 7. An individual must meet the requirements of the “means test” to be eligible for this type of bankruptcy. This option allows any creditor to repossess any property used as collateral on debt that will be discharged. The bankruptcy trustee may also liquidate any non-exempt property and distribute the proceeds to any unsecured creditors. There are exceptions to what type of debt can be discharged by the courts, these debts include: (1) tax liens, (2) student loans, and (3) spousal and child support. There are also limits (by state), regarding how much property can be exempted in a bankruptcy. This bankruptcy type can only be used by an individual once every 8 years. Depending on the mortgage type used, there are various waiting periods after a bankruptcy. For a Chapter 7 bankruptcy, the waiting period is 4 years for a conventional loan, 2 years for an FHA or VA loan, and 3 years for a USDA loan after discharge.

The second most common personal bankruptcy is Chapter 13. This option allows an individual to keep all their possessions and assets, but they must qualify for and accept a payment plan determined by the bankruptcy court to repay their creditors. The repayment amount is based on the individual’s income, monthly expenses, value of property, and debt being discharged in the bankruptcy. Most repayment plans are usually for a term of 3 to 5 years. Under this bankruptcy type, monthly payments are made to a trustee who oversees the completion of the bankruptcy and discharge. Unsecured debt and medical bills are not required to be repaid under this bankruptcy option. Depending on the mortgage type used, there are various waiting periods after a bankruptcy. For the Chapter 13 bankruptcy, the waiting period for a conventional loan is 2 years after discharge, whereas FHA, VA, and USDA allow financing as soon as the debtor has made 12 months of on-time payments. This is subject to court permission to obtain a mortgage if the bankruptcy has not been discharged.

When you apply for a mortgage after bankruptcy lenders will look closely at your post-bankruptcy credit history. So, it is important to keep all your payments on-time. Re-establishing credit is one of the most important factors after a bankruptcy. You should be actively involved in re-building your credit. Check your credit and scores on a regular basis, dispute any inaccurate credit, resolve any derogatory credit, open credit with secure credit cards and/or installment loans, and pay your bills on-time. Lenders will require a copy of your bankruptcy schedules and discharge paper; in addition to a thorough letter of explanation documenting the reason for the bankruptcy. Lenders will also require your credit to be reestablished with no derogatory credit since the bankruptcy. Ideally, an individual should have 1 installment loan and 2 revolving accounts (credit cards), with at least a 12 month payment history to show the lender they are able to manage their credit. For the revolving credit, it is in your best interest to keep the balance under 30% of the available credit limit, by doing this you will be maximizing your credit scores. There are other factors that lenders will use to qualify you for a mortgage after bankruptcy. These include down payment, income, employment history, and income stability. For additional information regarding mortgage financing after a bankruptcy, please contact a reputable loan officer.

Is Bankruptcy Good Business? Lessons Learned From Donald Trump

Donald Trump has filed for bankruptcy four times. None of those times were personal. Recently, Trump stated via Twitter and other sources that corporate bankruptcy is a good business strategy. Is this really true? Here’s a closer look at Trump’s Chapter 11 past, and why it worked.

Atlantic City: a Good Lesson in Corporate Bankruptcy Back in its heyday, Atlantic City was the place to be. It was glitz and glam and a money-making machine (kind of like Las Vegas is today). Eventually Atlantic City fell due to time and other factors. In the early 1990s, Donald Trump wanted to reclaim the Atlantic City that once was by building a number of casinos and lavish hotels along the famed boardwalk.

Trump’s first foray into reviving Atlantic City was a disaster. His ‘Trump Taj Mahal’ was financed largely by junk bonds (according Forbes.com), and the failure of the property to bring in revenue caused him to sell his Trump Shuttle Airline and Trump Princess Yacht. Since the investment that didn’t pay off cost him around $900 million in person – not corporate – debt, this was an excellent lesson for Trump.

Declaring corporate bankruptcy for the first time helped him secure his personal fortune while also eliminating the debt from Trump Taj Mahal. After going through that bankruptcy, Trump then went on to declare Chapter 11 three more times. How did he get away with it, and is it a good strategy for every business owner?

Corporate Bankruptcy As Business Strategy Trump was recently quoted as stating, “… basically I’ve used the laws of the country to my advantage and to other people’s advantage.” What he means by that is that Chapter 11 can shelter a company from complete destruction. Under the umbrella of corporate bankruptcy, a company that’s struggling (as all four of Trump’s Atlantic City ventures have) can restructure without the pressure of liquidating assets and making creditors unhappy.

It’s a tactic that Trump has made popular largely because of his big persona and brand name, but it’s not a strategy that he enjoys and owns alone. Numerous companies have gone through corporate bankruptcy for the same reason – because it’s much better than losing money on a sinking ship. Allowing a company to restructure under the Chapter 11 clause will bring in more money than liquidating that company’s assets, and this is what most creditors want to see.

But can this strategy work for companies that are much smaller in size? Does declaring corporate bankruptcy work for a mom and pop shop? Here’s where it gets sticky.

Applying Trump’s Strategy to Your Business First, your business has to be registered as a corporation that is separate from your personal name and life (this should really be the first step to opening any business, long before you consider Chapter 11). Once that’s done, you may be a good candidate for corporate bankruptcy if your business is not doing well and you want to restructure. Since a Chapter 11 filing is completely separate from personal bankruptcy, your personal assets will not usually be impacted by this decision.

However, there are a lot of different factors that come into play when deciding on Chapter 11. What worked for Trump many times might not work for your company without the right guidance. In some cases, Chapter 11 might not mean that a company owner has zero liability. In other cases, there are better alternatives to keeping a company afloat. On the other hand, Chapter 11 could be part of an early business plan, but there are various details included in that strategy that must be worked out with an attorney prior to any kind of filing.

Declaring Bankruptcy Steps What about for individuals? Bankruptcy for individuals can be viewed as a financial strategy. In many ways, bankruptcy is financial planning when you strip down the details – but, it’s important to have a competent bankruptcy lawyer on your side in order to tie up all of those loose ends.

Trump’s larger than life character is hard to ignore, and so are his various corporate bankruptcy filings. Every new business owner should have a bankruptcy attorney on speed-dial whenever they are making big financial decisions so that they thoroughly understand the financial implications to the business and themselves and their families.

Filing Bankruptcy to Stop Creditor Harassment

There are many different reasons to pursue bankruptcy. Getting a fresh financial start and being able to move ahead into the future in control of your finances is obviously the most important. In the meantime though, one of the clear benefits of filing for bankruptcy is that you can use it as a key tool to stop creditor harassment. Continue reading to learn more about how this works, why it’s so beneficial, and how you can capitalize on it to achieve your financial goals.

That’s not just a potential outcome, it’s actually mandated by Federal law. How exactly is this made possible? Well, the Automatic Stay kicks in as soon as you file for bankruptcy. Your benefits from this include immediately stopping many of the actions being taken against you, including creditor harassment.

This also includes collection agencies trying to repossess your property, and lawsuits being filed against you. Therefore, the best way to stop creditor harassment is actually to file bankruptcy and let that Automatic Stay provide you with the outcome you’ve been seeking.

What qualifies as creditor harassment though? There’s a range of specific rules in play here. But generally, creditor harassment includes adding to your debt or misrepresenting how much is owed, calling repetitively, calling you at work, or calling you outside of reasonable weekday hours, or disclosing the debt to third parties.

While it’s difficult to have these rules enforced, once you file for bankruptcy, creditors generally know they have to back off. If not, further action can be taken by yourself and your legal team. Therefore, once you file for bankruptcy, you can at least get your plate cleared of excessive phone calls, letters and threats, as you pursue your financial resolutions. It certainly provides some peace of mind and reduces the stress and hassle that you’re facing during this difficult time.

Before filing for bankruptcy, be sure to consult with an experienced attorney who will be able to guide you through the process. While stopping creditor harassment is a huge bonus to filing bankruptcy, there are still a range of ups and downs to carefully consider.

There are also different chapters of bankruptcy which provide you with different types of financial remedies, and different levels of property retention as well. It’s not always the right solution, so your personal circumstances and goals certainly come into play, but the Automatic Stay’s capabilities to instantly stop creditor harassment is a major plus.