If you file bankruptcy, you will face some challenges in the next few years that follow. One of those challenges may be trying to refinance your home. It could be a difficult task, but it can be accomplished.
First You Wait
Refinancing is not something you can rush right out and do as soon as your bankruptcy is finalized. There are waiting periods you must make it through before you can begin the process.
If you filed a traditional Chapter 7 bankruptcy and were able to retain your home, most conventional lenders will require you to wait at least 4 years before refinancing. This is, however, a shorter waiting period than you would be offered if you had experienced a foreclosure. After a foreclosure you could have to wait as long as 7 years before being eligible to refinance through traditional sources.
The waiting period for refinancing through the Federal Housing Administration (FHA) is only two years, but you must not incur any further debt during that two year period.
There are Exceptions
You may be eligible to get help from a new federal program call HAMP (Home Affordable Modification Program). If your house payment is more than 31 percent of your income, the HAMP program allows you to modify your mortgage. Unlike refinancing, you do not take out a new loan when you modify a mortgage; instead, you arrange new terms, such as a lower interest rate, an extended length of time to pay, or a reduction of principal. A combination of these steps can be used to bring your mortgage payment below 31 percent.
Traditional refinancing might be available to you sooner than the usual four years if you are able to prove that you had to file bankruptcy under extenuating circumstances. Qualifying circumstances that might be considered are death of the bread winner or other immediate family member, serious injury or illness, disability that resulted in loss of income, or other major events.
Most people are not aware of the options available to those who have filed for bankruptcy. If you live in Hawaii and have questions about Hawaii bankruptcy laws, talk to one of the Hawaii attorneys that have extensive bankruptcy experience. You may be surprised to learn that not all doors are closed forever just because you were a victim of the Great Recession.
