mortgage after bankruptcyBuying a Home After a Bankruptcy:

Facts About Home Mortgage after Bankruptcy Case
Historically, it was difficult to impossible for a person to obtain a mortgage after  bankruptcy. All of this has changed in recent years. Now, even a person who has a bankruptcy on his or her record is able to get a home mortgage. Usually, he or she is eligible within just a couple years after the  bankruptcy.
Are you thinking about filing bankruptcy? Do you have concerns about later purchasing a home and qualifying for a home mortgage? Then here are some facts that you do need to keep in mind.

Realities of a mortgage after bankruptcy and lenders

There are many misconceptions about the aftereffects of a bankruptcy case. Many people assume that once you file for bankruptcy, you will never be able to access credit again in the future .  Or at least anytime in the foreseeable future. In point of fact, this is one of many misconceptions that surround bankruptcy. I find in my bankruptcy practice in San Diego County that about  two to three years after bankruptcy filing that my clients call to get a new home mortgage after bankruptcy.
In fact, a growing number of lenders are willing to work with people who have been through a bankruptcy case. There are a number of reasons why a lender is willing to deal with a person who has been through a bankruptcy case.
Once a person has been through a bankruptcy case, that person’s debt is usually eliminated. Of course, (depending on the type of bankruptcy that a person has been through). A person may end up with some creditors to which he or she is still responsible.  But for the most part a person no longer has any financial obligations to creditors.
Misconception: “After a person files for bankruptcy, that person cannot turn around and file for bankruptcy again any time.” FACT: In fact, recent changes (well, 2005) in the bankruptcy code have made it far, far harder to file subsequent bankruptcy cases.
When it comes to a home mortgage loan, a lender at least has collateral in the form of the real estate that is subject to the loan. A mortgage is what is called a “secured debt.” The home is “security” for the loan. So lenders feel and actually are safer with secured debt. As a result, lenders are more willing to become involved in a secured loan. Even if  a borrower or applicant who has been through bankruptcy.
Unsecured debt like credit cards are a bit different. But even that has changed dramatically, too.

Lenders Who Specialize in Post-Bankruptcy Home Mortgage Loans

The home mortgage market has become extremely competitive in the 21st century. As a result, lenders are having to reach out to a wider range of consumers than at any other point in time in history.
In the 21st century, lenders are more willing to extend financing to people who have been through a bankruptcy case. Indeed, there are now lenders who cater specifically to people who have been through a bankruptcy case. This is especially true of borrowers in need of mortgage loans.
Here are a few key facts to keep in mind.
Generally, the interests rates associated with a post-bankruptcy home mortgage loan will be higher than what will be in place in a more traditional or conventional home mortgage loan. But this practice is changing fast. It may be less so when you read this than when Paul wrote it.
Post-bankruptcy, you may have to search harder to avoid higher interest rates and transaction fees. Supply and demand dictates that those whose credit is not as good will have to compete for a smaller pool of available loans.
Higher interest + higher closing costs and / or transaction fees translate to higher monthly payment. In addition, the length (term) of the loan offered may be a shorter than would be otherwise available through a more conventional lender.
Happily, the trend is toward a rapid normalization of lending to those who have endured bankruptcy.

Avoid the Sharks

In your own search for  a mortgage  after bankruptcy home loan, you need to make very certain that you only deal with a reputable lender. Unfortunately, in this day and age, there are many less than honorable operators. This is true whether you’re shopping for a loan in the “brick and mortar” world or on the Internet. There will always be unscrupulous merchants ready to prey on people who have less than perfect credit.
Make sure that you deal only with a reputable lender. By doing so, you will make certain that you do not make your financial situation worse.

Will I Face My Bankruptcy Creditors?

Will my creditors come to the court if I file bankruptcy?

What many of my bankruptcy clients worry about is that their bankruptcy creditors will be at the banker’s meeting if they file bankruptcy in San Diego and it will be embarrassing for them. The good news is, bankruptcy creditors rarely attend bankruptcy meetings of creditors (also called 341 hearings).  However, this does not mean that your bankers are giving up their right to object to your bankruptcy discharge.

Bankruptcy Bankers are not required to go to the  meeting of bankers

When you file for bankruptcy in San Diego, your creditors receive notice of the date and time of your meeting of bankers. But this does not mean that they will show up. Your creditors are invited, but not required, to attend your hearing. In 98 percent off all bankruptcy cases, no creditors will appear at the meeting of creditors. If a creditor does show up, your attorney will usually know about it and so will you.

Most Bankruptcy Lenders will not appear at the meeting of bankers

Creditors are not allowed to conduct an extensive examination of you and your situation at the meeting of bankers. Mostly creditor questions are limited to the nature and location of the debtor’s assets. In San Diego most creditor meetings are very short over in 5 to 10 minutes so, the bankruptcy trustee only has a few minutes to devote to each case.

As a result, unless a creditor believes that you are committing fraud or hiding assets, it will not benefit from taking the time to come to your hearing. However, even if a creditor does not attend your meeting of creditors, it can still object to your discharge

How Hard Will It Be to Rent an Apartment or House After I file Bankruptcy?

Many people delay filing bankruptcy out of fear that they will quite literally be unable to keep a roof over their heads. Some avoid bankruptcy altogether as a result of those fears. So let’s talk about whether those fears are justified.

Landlords routinely require credit checks of new tenants. That requirement goes right along with the rental application. And, of course, a bankruptcy will show up. There is no getting around that. Worse, there was a time when those facts could translate to homelessness. Literally, a family with a bankruptcy could find themselves in the street. I am happy to report that those times are long gone now.

Let’s begin by proclaiming that what was “then” is not “now.” The old, draconian practices are no more. That is true not only in theory. It is also true almost entirely in practice. Denying housing access on the basis of bankruptcy is almost entirely a thing of the past.

If Landlords Can Disregard a Bankruptcy, What DO They Care about?

What do landlords care about most, then? Landlords care about your current cash flow. That tells them a whole lot more about your ability to pay rent than does your bankruptcy. If you can show positive – or even break-even – cash flow, you almost certainly can be qualified to rent.

The Great Recession of 2008 and more recently the COVID-19 Pandemic have tended to impact landlord practices in somewhat different ways. But the sum of those ways has been a complete transformation of how landlords treat applicants who have filed bankruptcy. The reality of a “new normal” has taken root and has grown to bear fruit. There is now wide acceptance in American culture of the probable causes of a bankruptcy. Most of us by now realize that a filing is likely due to medical bills or involuntary layoffs, not irresponsible spending.

As a consequence, we can safely conclude that filing bankruptcy almost certainly won’t prevent you from being able to secure housing for yourself and your family.

paul staley bankruptcy lawyer
The Law Office Of Paul Staley provides legal advice and representation for residents of San Diego County. The information on this website is for general information purposes only. Nothing on this or associated pages, documents, comments, answers, emails, or other communications should be taken as legal advice for any individual case or situation. This information on this website is not intended to create, and receipt or viewing of this information does not constitute, an attorney-client relationship.
Paul Staley
Bankruptcy Attorney
1901 1st Ave., FLR 1 San Diego, CA 92101
Phone: +619 235 40 95

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