How Does Bankruptcy Affect My Ability to Get a Mortgage?

white family home

At one point in your life, you may have found yourself in a financial situation that required you to file for bankruptcy. But with these legal proceedings in your rearview mirror, you may want to move forward and buy a home. However, you may be unsure whether this is a viable option. Read on to discover if bankruptcy can affect your ability to get a mortgage and how a seasoned Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can help you overcome these barriers.

How can bankruptcy affect my existing mortgage?

If you must turn to a Chapter 7 bankruptcy filing while still paying off a mortgage, this does not necessarily mean that your home will be foreclosed upon. Rather, New York State’s homestead protection law may work to protect you from losing your home equity during these legal proceedings. More specifically, if your property is in Rockland County, then you may declare up to $150,000 as exempt from bankruptcy. And if you are married, this exemption may double to up to $300,000.

On the other hand, you may also take the initiative to set up an alternative payment plan for your mortgage. That is, you may apply for a loan modification so that you may adjust your loan payment schedule to better align with your financial situation. This may mean making less expensive mortgage payments each month for a longer duration of time.

As far as Chapter 13 bankruptcy goes, your equity may be considered too significant to qualify for a homestead exemption. However, there may still be an automatic stay placed on your home. In the meantime, you may incorporate missed and future mortgage payments into your reorganization plan.

How can bankruptcy affect my ability to be approved for a mortgage?

Unfortunately, you may be unable to apply for a mortgage loan amid your bankruptcy proceedings. This is because most major lenders and mortgage investors require that a bankruptcy filing be either discharged or dismissed.

Specifically, they may not consider your application if your Chapter 7 bankruptcy was discharged less than two years ago. More realistically, though, you may have to wait between four to seven years before getting approved for a mortgage loan.

If you underwent a Chapter 13 bankruptcy, then this waiting period may be four years since your bankruptcy petition was filed and two years since it was discharged. There is similarly a four-year waiting period for a dismissed bankruptcy proceeding.

This is not to mention how your diminished credit may hinder your opportunities for a mortgage. Overall, you must take your mortgage application seriously. So pick up the phone and call a competent Rockland County bankruptcy attorney today. Someone at The Law Offices of Allen A. Kolber, Esq. will be happy to answer.