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Refinancing Your Home After Chapter 7


Many people own a home before they file for bankruptcy protection, and once they are ready to start over and lay down that solid financial future, they will want to refinance their home loans. Refinancing a home can result in excellent benefits for a home owner.  By refinancing, you may be able to improve your cash flow by lowering monthly payments and reduce future risk associated with variable rates. The steps toward this process will differ depending on the type of bankruptcy filed and certain other factors. For both Chapter 7 and Chapter 13 bankruptcies, a common and crucial first step after bankruptcy is to carefully rebuild credit. Home refinancing is one area of your financial life that will benefit from undertaking this important task, and it is one where the benefits can be appreciated tangibly and relatively quickly.

If you have filed for bankruptcy under Chapter 7 and want to refinance your home, you want to allow some time to elapse after filing before pursuing refinancing. If you try to refinance too soon, before you've had a chance to rebuild some credit, your interest rate will probably be too high, and refinancing will be of little help. Depending on your credit rating prior to filing, it is preferable to wait at least six months, but a year is better, and two years better still.

Two years after your debts are discharged under Chapter 7, you will be considered an excellent risk by lenders for refinancing if you have no negative reports since your debts were discharged and you have positive information from three or more good references. Opt for a major credit card that reports regularly, as well as loans like car loans or creditors for medical services that will provide steady references while helping you take care of life essentials. Student loans are not discharged in a Chapter 7 bankruptcy, so these can also serve as a good credit reference. For revolving credit, keep your balances low, or even pay in full every month when you can. For all kinds of credit, remember to always pay in full and on time.

Once you've put in the work of building good credit post bankruptcy, and you are ready to refinance, make sure to shop around by calling several mortgage brokers. Let them compete for your business―you've earned this privilege through your hard work. Don't opt for those brokers who specialize in mortgage refinancing for bad credit; with strategy and patience you should be able to get a decent broker to work with, and you shouldn't settle. And remember not to let any brokers charge you for a consultation; a mortgage broker should get paid from the loan. Brokers specializing in  "bad credit refinancing" are especially likely to try to pull this trick.

The lesson here is to be patient and methodical about refinancing your mortgage loan. After a Chapter 7 bankruptcy, your immediate focus should be on rebuilding your credit so that you are in the best possible position to refinance as soon as possible. Talk to a bankruptcy attorney today to get the honest truth about bankruptcy and your credit. Serving North Carolina residents, the Law Offices of John T. Orcutt provides a free initial debt consultation. Call (toll free) +1-919-646-2654, to set up your appointment. Visit for more information.

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