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Post-bankruptcy home refinancing

For Kentucky residents who have filed for Chapter 13 bankruptcy or plan to file, there may be questions about how to move forward after the plan is in place. One article discusses the possibility of refinancing a home in the wake of a bankruptcy.

One important aspect of refinancing is to look at the overall goal. Refinancing can be used to either get a lower interest rate on the mortgage loan or change to a longer-term mortgage. The longer term can also lower the monthly payment, but runs the risk of increasing the overall cost of the home. Once the goals are sorted out, there are a few options for refinancing after a Chapter 13 bankruptcy. The federal government's Home Affordable Refinancing Program and its Home Affordable Modification Program can each facilitate an adjustment to the loan. These require that the borrower contact their loan servicer to begin the process.

Another government option is a Federal Housing Administration loan, which is available to those who have filed for Chapter 13. The borrower has to have been making payments on time for at least a year on their bankruptcy plan. Also, the court that approved the bankruptcy would also have to approve the new loan. If government options are not available, going the traditional lender route may be more difficult. Generally, a borrower in bankruptcy will have to wait at least two years following the discharge of the bankruptcy in order to get financing.

Recovering from a Chapter 13 bankruptcy can require some work, but it is possible to get a fresh financial start. An attorney may be able to counsel a borrower on how to stop foreclosure or creditor harassment as well as achieving manageable payments through filing for Chapter 13.

Source: FOX Business, "Bankrupt and Looking to Refinance Mortgage", Don Taylor, April 29, 2014

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