Bankruptcy and Refinancing

Going through bankruptcy and refinancing is something that can be done, unfortunately most people are not aware or overwhelmed, therefore miss out on opportunities available to them during this difficult time. Bankruptcy is a major financial ordeal that is financially and emotionally draining. It can sometimes be hard to visualize recovering from your current situation. Even though, this is a difficult time for you, and for all the people in your relational world, it is important to remember that being proactive will go a long way into seeing you recover quickly. Many bankruptcy situations allow you to keep your home, and provided your house has a good equity position of approximately 30% you may be able to refinance you current debt load, and improve your monthly cash flow. Sadly, even though this information is true, few home owners do not know where to start, and thus fall prey to losing their home. Here's how you get started.

Note, this page focuses exclusively on bankruptcy and refinancing. If you are interested in some of the other refinancing options or articles, see the links below.

Refinancing During Bankruptcy

Refinancing After Bankruptcy

Auto Refinancing And Bankruptcy

OK, on with the bankruptcy and refinancing details.

Consult a Mortgage Professional
If you are in bankruptcy and refinancing, it is best to go directly to a qualified mortgage professional. Each lenders' rules and regulations vary, and a mortgage professional will know all the current information as to which lenders are offering a program that will suit your specific financial position.

Make Sure the Loan is For You
Just because you can get approved for financing doesn't mean you should take whatever comes your way. Do an analysis of your current situation and see if refinancing your house will reduce your monthly bills enough that you will be able to afford to make the payments. A good rule to follow is that your monthly house expenses including mortgage, property tax, insurance, power and water should amount to no more than 30% of your monthly "take home" pay. Failing to acknowledge this rule may quickly lead you right back into bankruptcy.

Will refinancing lead back to bankruptcy?
If you cannot afford the monthly payments after refinancing you should consider selling your home. Before you take this route though, evaluate what your rent cost will be and consider exploring ways to create extra income in your household. The most important consideration should your house's affordability rather than holding on to your home.

If you start the process late, and you are already in foreclosure, you will need to pursue a Foreclosure Bailout Loan, these loans are made with fees and higher interest rates attached to them. Depending upon your situation, this may be a viable idea, but be careful not to hold onto your home if you truly can't afford it, as you will find yourself in the same situation as before.

Work at rebuilding your credit
There is a good chance that when you are in bankruptcy and refinancing the terms will be less than favorable. It is important that you re-establish your credit, this can be accomplished by establishing two new credit lines (the best is one loan, and one credit card). Once your credit score is re-established and your FICO score has increase, you will be able to qualify for more favorable loan products and programs.

When you are going through bankruptcy, and refinancing also start the process as early as possible, as lenders will be more willing to work with you and help you in your current situation.

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