Homeowners's Bankruptcy Mortgage Information

Bankruptcy attorneys estimate that one in every 53 U.S. households filed for bankruptcy in 2006. Most of these people didn’t lose the farm in Vegas or drink away their life savings. Chances are their financial problems stemmed from one of three sources: job loss, divorce, or unexpected and expensive medical emergencies.

Most homeowners who file for bankruptcy do not lose their homes. Bankruptcy laws are designed to satisfy creditors and protect debtors. Putting a family out on the street helps no one.

• Advice when Choosing a Bankruptcy Lawyer
  Despite popular conception, bankruptcy law is not very complicated, so hiring an expert most of the times does not make sense...

Ted Janger of The American Bankruptcy Institute stresses that, “It is important to have competent counsel advise you, both about the choices among chapters and about how best to make sure that bankruptcy operates to solve your financial difficulties, rather than just as a hiatus.”

Establishing Credit After Bankruptcy
For people who got into trouble with credit, the thought of using it again can be frightening. It’s a catch-22. To be considered a good candidate for a new mortgage or car loan, consumers have to rebuild their credit. If they don’t, when a prospective lender looks at their credit report, all they will see is the bankruptcy. There won’t be a new track record of handling credit responsibly or of improved financial management skills.

It doesn’t seem logical, but after people have successfully filed for bankruptcy, they will receive a flood of new credit offers. If they accept a few well chosen ones and pay more than the minimum payment each month, this will appear as positive data in their credit report.

One form of new credit would be a first mortgage refinance or a new second mortgage. Either transaction would depend on the amount of equity in the home and be subject to any guidelines established by the bankruptcy court.