Bankruptcy and mortgage refinancing

By Marrero, Chamizo, Marcer Law, LP,

Assuming that a Florida homeowner who has filed for bankruptcy owes less on a mortgage than the home is worth, how long a wait is there after the bankruptcy has ended before a refinancing of the mortgage is possible? It partially depends on why the homeowner went bankrupt to begin with. In the event that it occurred because of a job loss, an unexpected expense or other reasons beyond the debtors control, Fannie Mae and Freddie Mac allow individuals to refinance within 24 months.

In some cases, it may be possible to refinance while still in bankruptcy. However, the bankruptcy court must approve the refinance as it technically constitutes new debt. This is because a debtor must submit new loan paperwork and will often use a new lender to obtain the loan. The request to refinance while a case is still pending is usually referred to as a motion to incur new debt or something similar depending on the jurisdiction.

Those who are able to verify the source of their financial troubles may be able to refinance a loan through the FHA in as little as a year. This assumes that they meet other lending criteria and have taken an approved housing course. Furthermore, an individual would need to show that he or she has re-established his or her credit over the course of the year since the bankruptcy case ended.

Filing for Chapter 13 Bankruptcy may be one way to hold on to a home that is subject to a mortgage that is in default. The court-approved repayment plan can allow debtors to catch up on past-due payments and then to stay current. There are a variety of eligibility and other requirements attendant to the chapter that an attorney can outline.