Waiting Periods After Bankruptcy

Reblogger Roy Kelley
Real Estate Agent with Realty Group Referrals 16766

The guidelines  for waiting periods after bankruptcy are almost as confusing as the guidelines for short sales and foreclosures.  The guidelines will be provided in two parts so as to keep things short and simple.  This post will address conventional loans and tomorrow I will develop the guidelines for FHA, USDA/RD and VA.

Please visit the original blog if you wish to leave comments.

Original content by Randy Kirsch NMLS #1012303

As George Souto has provided a wealth of information about waiting periods after a short sale or foreclosure to apply for various types of mortgage loans, you need to be aware that there are also waiting periods after going through bankruptcya bankruptcy.  The guidelines  for waiting periods after bankruptcy are almost as confusing as the guidelines for short sales and foreclosures.  The guidelines will be provided in two parts so as to keep things short and simple.  This post will address conventional loans and tomorrow I will develop the guidelines for FHA, USDA/RD and VA.

To understand fully these waiting period guidelines, you need to be aware of the different types of bankruptcy proceedings.  A Chapter 7 proceeding is a liquidation of the debtor's assets and the debts are discharge, with any available assets being divided among the creditors based on the class of the creditor's debt.  In a Chapter 13 proceeding, the debtor's obligations are restructure and monthly payment amounts are adjusted so that the debtor pays his debts in full over a period not to exceed five years, under the supervision of the bankruptcy court.  A Chapter 11 filing is for businesses and involves a restructuring of the debtor's obligations.  Generally, bankruptcy filings do not affect secured debts.

For conventional loans that are sold to Fannie Mae, there is a 4 year waiting period for Chapter 7 and Chapter 11 bankruptcy proceedings, except that if there are extenuating circumstances the waiting period is reduced to two years.  Fannie's guidelines do not state whether that is four years after dismissal or discharge of from the date of filing.  It would be a safe assumption that the date of discharge or dismaissal would be the applicable start date to determine the actual waiting period for a particular potential borrower  For Chapter 13 proceedings, the waiting period is two years after a discharge or four years after a dismissal.  In other words if a potential borrower who went through a Chapter 13 proceeding did not complete the payment plan and his petition was dismissed, that person must wait longer than the person who successfully completed the bankruptcy payment plan.  If the potential borrower has filed more than one bankruptcy petition within the seven year period prior to the loan application, that person will be subject to a waiting period of five years, except that if there are extenuating circumstances, the waiting period will be three years from the most recent discharge or dismissal.

Lenders do have the option to extend the waiting periods under their own underwriting standards. They do not have the ability to shorten the waiting periods except for extenuation circumstances.  The FNMA guidelines define extenuating circumstances as, "Extenuating circumstances are nonrecurring events that are beyond the borrower’s control that result in a sudden, significant, and prolonged reduction in income or a catastrophic increase in financial obligations."

In case you missed the series of blogs by George Souto on waiting periods for short sales and foreclosures, his blogs can be found HERE.

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Randy Kirsch, NMLS #1012303

Right Trac Financial Group, Inc. NMLS #2709

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Manchester, Ct. 06042

Office: 860 647-7701 X120

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Cell: 202-827-6434

Email: randy@righttracfg.com

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The blogs written and published by Randy Kirsch are not in any manner whatsoever to be considered as legal advice or as a legal opinions.  If you have legal questions or concerns regarding any area of real estate law or mortgage law you are advised to consult a licensed, competent real estate attorney in your local area to address your concerns and questions.

 

Randy Kirsch does not guarantee nor is in any way responsible for the accuracy of the information provided herein, and provides said information without warranties of any kind, either expressed or implied.

 

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Rainmaker
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Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Roy. Randy Kirsch did such a great job taking the mystery out the the waiting period necessary to wait before being able to get a mortgage or refinance after a BK.

Jan 20, 2015 06:10 PM #1
Rainer
1,756,848
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

Hi Roy.  Randy Kirsch is very knowledgeable.  Great reblog.

Jan 20, 2015 07:09 PM #2
Rainmaker
5,576,021
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Thanks for stopping by. Please be sure to leave comments at the original blog by Randy Kirsch

Jan 20, 2015 07:58 PM #3
Ambassador
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Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional
Charles Rutenberg Realty - Clearwater, FL
Palm Harbor, Dunedin, Clearwater, Safety Harbor

Great choice for a reblog and much needed information for those that went through bankruptcy.

Jan 20, 2015 09:51 PM #4
Rainmaker
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Captain Wayne - Rowlett Real Estate School
REcampus Fully Accredited Florida ONLINE & Classroom Training in Destin, Pensacola Florida - Panama City Beach, FL
Rowlett Real Estate School / Owner and Instructor

Good morning Roy! Thank you for this, it was very infromative. I did not know all of this until now.

Jan 20, 2015 11:10 PM #5
Rainmaker
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Kristin Johnston - REALTOR®
RE/MAX Realty Center - Waukesha, WI
Giving Back With Each Home Sold!

Thanks for sharing this!  I hope you have a wonderful, relaxing, successful rest of the week!

Jan 20, 2015 11:56 PM #6
Rainmaker
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Tom Braatz Waukesha County Real Estate 262-377-1459
Coldwell Banker - Oconomowoc, WI
Waukesha County Realtor Real Estate agent. SOLD!

Roy Kelley

I just had a loan from a listing where the bankruptcy was ok and only a few years old. A medical bankruptcy

Jan 21, 2015 11:02 AM #7
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Roy Kelley

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