Indiana Mortgages and Indiana Bankruptcy – Always the Twain Shall Meet

September 23, 2012 1:25 pm Published by

“Every month tens of thousands of people file for federal bankruptcy protection, mostly to wipe out debts and start anew,” begins an article in the New York Times. (Here’s the part I especially want to share with my Bankruptcy in Indiana readers:)

“Many of these filers mistakenly think that it will be many years before they can obtain a mortgage or refinance an existing home loan, if they ever can – perhaps because notice of a bankruptcy filing typically stays on a credit report for 7 to 10 years.  In reality, they could become eligible in as little as one year, as long as they work diligently to improve their financial picture. "

(That is exactly the case. Just last Monday, I ran into a former client who told me she filed just one year ago and recently has been given a new mortgage!)

With Zuckerberg bankruptcy law offices spread throughout central and southern Indiana, we lawyers for bankruptcy field an awful lot of questions about home mortgages, and how we can help stop foreclosure.  Many of those questions boil down to which is ”better” – foreclosure or bankruptcy? (Obviously, neither is something to which any client would aspire, but people want to know which is the lesser “evil”, I suppose.) There are several important reminders to offer:
 

  •  Even though the two topics of foreclosure and bankruptcy are related in that they both have to do with debts, they are two totally separate legal issues.
     
  •  The way the law stands today, the bankruptcy court does not have the power to modify mortgages.
     
  • Although I practice Indiana bankruptcy law, one way in which I and all my Indiana bankruptcy attorney colleagues help you is to analyze the financial situation, have property appraisals run, and prepare the debt-income ratios needed to negotiate mortgage modification, and in general help you through the process of dealing with  your mortgage lender.

Now, going back to the New York Times article about buying new homes or refinancing after filing personal bankruptcy, I know a thing or two about that as well, after more than 25 years offering Indiana bankruptcy help.

1. General speaking, two years after a bankruptcy, you should be able to qualify for a mortgage (assuming you’ve managed your finances responsibly within the plan and have enough income to support the payments).

2. If you filed under Chapter 13 bankruptcy law in Indiana, there is a somewhat better chance of qualifying for a mortgage sooner (as compared with bankruptcy Chapter 7).
 

While one of the big fears clients have is that, once they’ve filed personal bankruptcy or small business bankruptcy in Indiana, many years will go by before they qualify for credit again, reality is much more rosy.  Nearly every debtor will receive credit offers shortly after bankruptcy, and some of those are for car loans and even mortgage loans. `

 

 

 

 

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This post was written by Mark Zuckerberg

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