Virginia homeowners and others throughout the country may be interested in refinancing their mortgages after filing for bankruptcy. However, an individual will likely need to wait at least a year before a home loan can be changed in any way. Those who have an FHA loan will need to wait up to two years after filing for bankruptcy to change the terms of their mortgages. The waiting period decreases to one year if the bankruptcy was caused by circumstances outside of a person’s control.
Extenuating circumstances could include the death of the family’s primary income earner or an illness that makes it impossible to work. Those who have conventional mortgages can refinance them four years after filing for Chapter 7 bankruptcy, and the waiting period is two years if extenuating circumstances caused a person to encounter financial distress.
Individuals who file for Chapter 13 bankruptcy will need to wait at least a year to refinance an FHA or VA loan. Homeowners typically can’t refinance a conventional mortgage for at least two years after the bankruptcy case is discharged or dismissed. It is important to note that lenders can add additional requirements when evaluating a loan application. Furthermore, those who have filed bankruptcy multiple times over a period of seven years will need to wait at least five years to refinance their home loans.
Filing for Chapter 7 bankruptcy may allow a person to eliminate unsecured debts without forfeiting property. However, it may also result in a debtor losing his or her home in an effort to repay creditors. An attorney may be able to provide insight into how a trustee determines which assets can be sold and which remain with a debtor. Legal counsel may also explain an automatic stay and how it might help a debtor.