QUESTION
Can someone please clarify the rules on Purchasing after Chapter 7 and Foreclosure?
Asked on Jul 28th, 2013 on Bankruptcy - New Jersey
More details to this question:
My husband and I claimed bankruptcy after a job loss in late 2009. We are ready to purchase, but were turned down because of the foreclosure date on our home. We never re-affirmed the debt, and they foreclosed in 2012. The bank we were working with said we have to wait 3 years after foreclosure, but I thought the BK/FC was one event, since we never re-affirmed.
5 ANSWERS
Bankruptcy Law Attorney serving Austin, TX
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Law Office of Susan G. Taylor
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You're right only the bankruptcy should have been reported. I believe FHA's underwriting standard is that you can buy a house 2 years after a bankruptcy.
Answered on Jul 31st, 2013 at 12:54 PM
Submitting bankruptcy paperwork saying that you intend to surrender property isn't the same thing as actually surrendering the property. Had you taken the steps to end your ownership in the property without foreclosure, such as a deed in lieu of foreclosure or short sale, you could have avoided the consequences of a foreclosure. Unfortunately, a foreclosure is a separate event from a bankruptcy and it is the choice of the lenders as to how long they wish to wait to issue you credit again.
Answered on Jul 30th, 2013 at 2:09 PM
Bankruptcy Attorney serving Dallas, TX
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Polk & Associates
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There is no single set of "rules" that govern the time frame you have to wait before buying a house. You can buy one the same day your bankruptcy is over if you want to. If your bank said they don't want to make the loan to you currently, you're free to go apply at a different lender that has different underwriting criteria. The second issue is that yes, you might want to clean up your credit report. The 2012 foreclosure should not be reporting that way because you had no personal liability on the date after 2009-2010. If there is something incorrect on your credit report, you fix it with the person who produced the credit report- Equifax, Experian, TransUnion.
Answered on Jul 30th, 2013 at 9:19 AM
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I am sorry that you encountered this difficulty. Bankruptcy and foreclosure are legal proceedings. Obtaining a loan is a matter of creditworthiness. There is no direct relationship between the legal proceedings of bankruptcy and foreclosure and your entitlement to obtain financing for another home. A lender must make the business decision that a person in entitled to receive a mortgage. There are restrictions that prevent lenders from discriminating. There is no legal requirement that a lender give someone another mortgage after that person has defaulted and failed to repay a mortgage. In addition, lending requirements have become more difficult for people with good credit and money to put down. Securing a mortgage has become more difficult for everyone. You should find an experienced and reputable mortgage broker to assist you in finding a lender that is more willing to lend after a bankruptcy and foreclosure. It may take more time and more money down.
Answered on Jul 30th, 2013 at 9:15 AM
General Law Attorney serving Cherry Hill, NJ
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Mark S. Cherry, Attorney at Law, PC
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The bankruptcy discharged your I obligation under the note. The foreclosure was the loss of the collateral real estate. Your problem is with the loan underwriting guidelines.
Answered on Jul 30th, 2013 at 8:39 AM