Bankruptcy proceedings may affect many facets of your life, including the property you own or wish to own in the future. Follow along to find out how a bankruptcy filing may affect your mortgage loan and how a proficient Louisville, Kentucky consumer bankruptcy lawyer at Schwartz Bankruptcy Law Center can help you overcome this challenge.

How can a bankruptcy filing affect my future mortgage loan?

Put simply, you likely cannot apply for a mortgage loan straight away after declaring bankruptcy. This is because a majority of major lenders and mortgage investors enforce a waiting period. This waiting period is dependent on the type of bankruptcy in which you filed, along with whether it was ultimately discharged or dismissed. Examples are as follows:

  • A Chapter 7 bankruptcy that was discharged: at least two years from the date on which it was discharged.
  • A Chapter 7 bankruptcy that was dismissed: anywhere between four to seven years from the date on which it was dismissed.
  • A Chapter 13 bankruptcy that was discharged: at least four years from the date on which it was filed and two years from the date on which it was discharged.
  • A Chapter 13 bankruptcy that was dismissed: at least four years from the date on which it was dismissed.

What’s more, your credit may be significantly impacted in the aftermath of your bankruptcy proceedings. For example, if you initially had a good credit score of 700 or more, it may plummet by at least 200 points upon your bankruptcy filing. In addition, your Chapter 7 bankruptcy filing may remain on your credit report for up to 10 years, while your Chapter 13 bankruptcy filing may stay for up to seven years. Ultimately, your credit goes hand-in-hand with your ability to be approved for a loan.

How can bankruptcy affect my current mortgage?

Say, for instance, that you already have a mortgage loan; and that you are tending to fall behind on your monthly payments. You may consider filing for a Chapter 7 bankruptcy so that you may qualify for a homestead exemption. This may allow you to protect your home’s equity of up to $46,350.

However, the state of Kentucky only has individuals who are 65 years of age or older as eligible for this exemption. Also, these individuals must own or occupy the home as their primary residence as of January 1st of the year on which they apply for this exemption. So, if you do not meet the eligibility criteria for a homestead exemption, you may consider applying for a loan modification instead. This may allow you to edit your loan payment schedule to better match your current financial state.

But if you are facing a Chapter 13 bankruptcy, then you may incorporate your missed mortgage payments, along with your upcoming mortgage payments, into your mandatory three- to five-year repayment plan.

In the end, you must deeply consider your current and future mortgage loans before filing for bankruptcy. So pick up the phone and call a talented Louisville, Kentucky consumer bankruptcy lawyer today. Someone at Schwartz Bankruptcy Law Center will be happy to answer.