Tag Archives: credit after bankruptcy

Mortgage loan options after bankruptcy

There are several types of mortgages available in to home buyers after a bankruptcy discharge. After a bankruptcy discharge under Chapter 7 or Chapter 13 you may be able to qualify for a mortgage sooner than you think. When your debt to income ratio is better after discharging some or all debts, you may be a better lending risk when you have more disposable income to save money and pay bills. After your bankruptcy discharge you have some time to work on re-establishing your credit and saving money for down payments and closing costs. When you are ready to start shopping for a mortgage there are several options to consider depending on your personal situation and home ownership goals.

How long will I have to wait?

There are two types of bankruptcy, Chapter 7 (full discharge) and Chapter 13 (partial discharge and reorganization). Many people with Chapter 13 bankruptcies are approved for government-backed mortgages after one year or they could be approved for a conventional mortgage loan after two years. The Chapter 7 bankruptcy filers may have to wait three or four years after their discharge to be approved for a new mortgage.

Some people chose to take at least two years or more to rebuild their credit using secured credit cards and small loans, while also saving cash for the expenses involved in putting money down and closing on a new home. The longer you wait, the better interest rate you may get. This is not always true however because interest rates fluctuate.

Conventional and government-insured loans

The difference between conventional loans and those insured by the U.S. Government is the financial guarantee for the lender, in case the individual fails to pay the mortgage. Conventional loans are not guaranteed by the federal government, and because they are not secured, the buyer must have better finances.

The common government-insured mortgage loans are the FHA loans, VA loans and USDA loans:

  • FHA loans backed by the Federal Housing Administration allow participants to make down payments as low as 3.5%. Purchasers will be required to pay for mortgage insurance which increases monthly payments;
  • VA loans secured by the U.S. Department of Veterans Affairs help military service members and their families buy homes with 100% financing meaning the purchaser only needs to pay the closing costs.
  • USDA loans are insured by the U.S. Department of Agriculture and benefit rural buyers who satisfy income requirements including a steady middle class income who otherwise may not qualify for conventional loans.

Adjustable vs fixed-rate mortgages

If you are approved for a fixed-rate mortgage when interest rates are low you will be locked in at that low mortgage rate for the entire term of the loan and your monthly payment will not change. The other type of loan is an adjustable-rate mortgage loan (ARMs) which have interest rates that change from time to time based on interest rates. Some ARMs provide fixed rates for several years after which time the rate is subject to adjustment based on the rates at the future date. If interest rates are high on mortgages when you are applying, you might want an ARM so that you can try to lock in a better rate when the rates go down. You always have the opportunity to refinance your loan and select a fixed-rate mortgage after having an ARM for some time.

For more information about applying for mortgages after a bankruptcy, please call Joseph Wrobel, Ltd.

About us: Joseph Wrobel, Ltd., works with clients to find out if they qualify for Chapter 7 or 13 bankruptcy, and their options and rights under the law. The firm will also advise and assist clients with questions and concerns about the collectors and their rights to pursue you.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

Don’t forget to keep up with us on Facebook, Twitter, LinkedIn and Avvo, where you can read client and peer reviews!

 

How is Chapter 7 different from Chapter 13 Bankruptcy?

When consumer confidence is high and the financial markets are doing well it may be time to drop some of your financial dead weight to clear space for new jobs, more money and less debt. Many people have added it all up and said, “If I only had this amount of extra money, I could clear everything up and actually start getting ahead.” What do you do about those bad decisions or unfortunate situations that were not your fault, but still have a hefty price tag? When you are saddled with debt you cannot pay, you may start thinking about bankruptcy options. Do not be dissuaded by the anti-bankruptcy ads on television, paid for by debt repayment and restructuring companies. Most of them do not get people the fresh start they need to really be successful. If you want to get out of debt and do it right, there are two consumer bankruptcy options for you, Chapter 7 discharge and Chapter 13 restructuring.

What are the differences between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 is a liquidation bankruptcy. When you qualify for a Chapter 7 liquidation (or think of complete discharge) you can literally wipe the slate clean. Note that only certain debts may be discharged, such as court judgments against you, credit card debts and loans you cannot pay. You cannot however get rid of child support obligations, student loans or certain tax or municipal fines.

Chapter 13 is a reorganization bankruptcy. If you do not qualify for a Chapter 7 discharge, you may be able to file a Chapter 13 petition for bankruptcy. You will be able to repay a portion of your debts, every month, over time. In a Chapter 13 you get to keep all your property, including non-exempt assets. When you have the income to pay debts, but need some time to spread it out and get caught up, a Chapter 13 can be your best path to financial freedom.

Note that when you file a Chapter 7 or Chapter 13 Bankruptcy, the Automatic Stay provision kicks in which prevents bill collectors from doing anything to collect a debt while you are in bankruptcy. In a Chapter 13, you pay the Bankruptcy Trustee every month and they make the negotiated payments on your debts. For people who want to keep their house and other valuable assets and still get bankruptcy relief, Chapter 13 is a great thing.

How do I know whether I qualify for Chapter 7 or Chapter 13 Bankruptcy?

To qualify for a Chapter 7 Bankruptcy, and get a full discharge of qualified debts, you must show financial need and hardship through a means test calculation. Your bankruptcy attorney can do the math and let you know whether you qualify. In the event, you do not qualify for a Chapter 7, you can always file a Chapter 13 bankruptcy instead. Let’s say you make just a little bit too much money or have a little more equity in your home you want to preserve, the Chapter 13 will still help you and you will repay only a portion of your debts over time.

How long will a Chapter 7 or a Chapter 13 Bankruptcy take to be completed?

A Chapter 7 Bankruptcy can be filed and discharged within several months. Your bankruptcy attorney collects all the necessary information, files the petition, appears with you at the Notice to Creditors Meeting, after which time you wait to see if any of your creditors file any objections to your bankruptcy. In a few months, you have a full discharge. In Chapter 13 Bankruptcy, you can get caught up on missed payments and non-dischargeable debts over a three to five-year period.

What steps can I take to make sure I have good credit after my bankruptcy case?

When preparing for credit worthiness after bankruptcy, remember that the only thing that matters is what you do with your finances after the bankruptcy. Your credit score determines how risky it may be to lend you money or credit. To reduce that risk, many companies offer secured credit cards. Anyone can get a secured credit card by paying a deposit of $200. If you never pay the bill, you forfeit your deposit. Without a bunch of missed monthly payments, there is nothing to negatively affect your credit score. Keep up with the secured card and you will start receiving regular credit card offers in no time. Buy a new car or a new home in a handful of years after a bankruptcy. There are many people who tell success stories about the new opportunities they seized after getting out from behind the eight ball.

If you have a question about any of the bankruptcy details mentioned in this article, it costs you nothing to call Joseph Wrobel, Ltd. and find out what bankruptcy law may mean to your financial future.

About us: Joseph Wrobel, Ltd., works with clients to find out if they qualify for Chapter 7 or 13 bankruptcy, and their options and rights under the law. The firm will also advise and assist clients with questions and concerns about the collectors and their rights to pursue you.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

Don’t forget to keep up with us on Facebook, Twitter, LinkedIn and Avvo, where you can read client and peer reviews!

 

Credit repair tips: Secured credit cards, limited balances and OptOutPrescreen.com

There are many misconceptions out there about which path is the right one to financial freedom and success. One thing to always ask yourself is, “Who has something to gain by the decision I make?” If you are researching whether bankruptcy or a debt repayment plan is going to work, you will likely hear a variety of things from people with a wide range of opinions regarding the best route to a good credit score. If you have bad credit because you fell on hard times, it can be fixed. People who file bankruptcies typically qualify for conventional home loans with competitive rates within four years of filing bankruptcy. In a bankruptcy, you can discharge some or all debt you cannot repay. After the bankruptcy, when you are not suffering from all that debt, it is easy to get a secured credit card or two and follow a few credit building rules if you want to qualify for a good mortgage.

How does credit scoring work, generally?

Your credit scores all vary slightly among the three major credit reporting bureaus, TransUnion, Innovis, Equifax and Experian. While it may seem like a mystery calculation behind the magic curtain, there are a few basic rules that make logical sense. Your credit scores reflect the amount of risk a lender is taking by giving you a loan, mortgage or credit card. The better the score, the more likely you are to pay your bills and loan payments on time. If you owe less debt and don’t have a dozen minimum monthly credit card payments, you likely have the money to pay your bills – this is your DTI – debt to income ratio. You want your income to be enough that after you pay your bills you have extra spending money to save for a rainy day. If that is you, you are less likely to default on your bills and loans.

Regarding credit cards, there is a similar calculation of how much credit you have and how much you use. The information on your credit report indicates how high your balance may be and the amount of your credit limit you use. A significant portion of your credit score is an equation of how much credit you have available and how much you use. People looking to get into a new mortgage are often told to never use more than 20 percent of the available balance on a credit card. So, if you get a credit card with a $300 limit, don’t charge more than $60 a month. Always make the payment on time but do carry a small balance instead of paying it off in full – because if the credit card company is reporting zero balances it looks like you have credit cards you are not using and that can hurt your score.

You can always get a secured credit card even if you don’t qualify for a regular credit card yet.

Secured credit cards are easy to obtain. Most local banks offer them. You pay a $200 deposit, for example and your secured card will have a $200 limit. You can use it to pay a small monthly bill or two, like Netflix, every month, and you are now boosting your credit score. If you fail to pay the credit card bill, the company cancels the card and you forfeit the deposit. If there are more charges you can be on the hook for them as well and a collector will hurt your credit score and call and harass you until you pay up. If you are working on credit to apply for a mortgage, use the same rules that apply to conventional credit cards, and always keep your balance due somewhere between 10 and 20 percent of the available balance on the card. Again, avoid maxing out the card, even if you pay it off every month in full or always make the minimum payments on time. Just like the debt to income ratio, your available to used credit is important to monitor.

The easiest thing to boost your credit may take only five minutes on OptOutPrescreen.com.

The credit bureaus encourage consumers to be educated about credit offers and opportunities with good interest rates. As your credit score starts rising you will start receiving pre-approval letters in the mail. The credit reporting companies share your improving credit information with these companies. The Fair Credit Reporting Act (FCRA) is the federal law that imposes rules and restrictions on credit companies. The law gives you the right to “Opt Out” of receiving credit offers. Did you know that taking advantage of your opportunity to opt out can raise your credit score, by 25 points in many cases?

Why does Joseph Wrobel Ltd. care about your credit score?

Our Chicago bankruptcy law firm has been around for decades and we have a solid reputation. We don’t put people into bankruptcies simply to earn a fee and move clients through a big law factory like some of the big bankruptcy firms. Instead, we focus on teaching potential clients about the options they have and how they can best fix their finances. We know that the bankruptcy will show up on your credit score and it may take a little while to be approved. What matters is not the bankruptcy or what lead to it, what matters is what you do after the bankruptcy. Following simple credit use tips and maintaining control over your finances can help you get back to a very good credit score much quicker than you realize. While we are not a credit score repair business, we do know a few things and have credit repair professionals who can help.

About us: Joseph Wrobel, Ltd., works with clients to find out if they qualify for Chapter 7 or 13 bankruptcy, and their options and rights under the law. The firm will also advise and assist clients with questions and concerns about the collectors and their rights to pursue you.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.

Don’t forget to keep up with us on Facebook, Twitter, LinkedIn and Avvo, where you can read client and peer reviews!

Credit cards after bankruptcy: Don’t fear the system, use it to your benefit

You might have heard it before, “What happened before your bankruptcy doesn’t matter, it’s all about what you do afterwards.” This is true with credit cards and your credit scores. Many people are reluctant to get a credit card after a bankruptcy because they are afraid they will fall back in the same trap that put them in a Chapter 7 or 13 in the first place. Qualifying for a credit card might be easier than you thought, and a secured card might be your best friend in rebuilding your credit rating.

Your credit score is an asset and you can and should use it to help you get ahead and build for the future.

Think of your credit rating as an asset you can use to leverage your ability to pay the credit cards back when you are carrying less debt on your shoulders. The ability to earn credit and pay it back is not the same after a bankruptcy discharge. If you owe less money to people, lenders might be more likely to extend that credit you might need to get ahead or keep up if something comes up.

Credit histories and scores are important when you apply to rent a home or apartment, when you look for a new job, and when you want to borrow money from your bank or credit union to buy a new car or something you need around the house, garage or lake. If you can reasonably afford a monthly payment, you should be able to borrow money and make the monthly payments, on time, to help rebuild and boost your credit score.

When should you apply for a credit card or a loan, to make purchases and rebuild credit?

As soon as you are able to obtain a line of credit, secured or unsecured, it makes sense to take these steps to rebuild and earn a better credit score than you thought you could achieve. The key is to spend your credit as if it is cash in your checking or savings account. Some people keep their credit card receipts and toss them in a box, paper-clipped to cash to cover the receipt. Then, when it is time to pay the bill, turn the cash into a proper payment method and pay that credit card in full every month.

If you can otherwise manage your money and not get behind in payments, go forth and charge away. There might be an emergency where you can only pay the minimum from time to time, but recall the spending and payment patterns that caused problems in the first place. If your bankruptcy was a result of a medical emergency or unforeseen event, please do not be offended by these tips, but appreciate that many people fall behind financially through their own doing or with no fault whatsoever. Again, what matters after a bankruptcy is more important than what lead to the filing in the first place.

Go get a secured credit card; you might be able to get one very soon after your bankruptcy discharge.

Many ask, “Who would ever give me credit after a bankruptcy?” The lending decision on extending credit is based on the likelihood that the debt will be repaid or secured in the event the borrower defaults. A secured credit card is one that looks and works just like any conventional credit card, with one exception, you pay a deposit, held by the issuing bank or credit union. If you don’t pay the bill on your secured card, the bank collects your deposit and they are not out the money. It makes sense for them and it makes sense for you.

Credit unions operate using a different set of rules for lending, and they can offer more options to someone in the process of rebuilding their credit. Start by setting up a checking or savings account with a credit union nearby your home or place of employment. If you get to know the people at the credit union when you stop by to make deposits and withdrawals, they can get a better sense of who you are as a person, not just a number on a credit report. Of course there are rules the credit unions follow, and it may be a while, but eventually they might be the best place to go when looking for a (secured or unsecured) credit card, home, boat or auto loan.

Joseph Wrobel, Ltd., wants to help clients get back on their feet and achieve financial success.

Encouraging clients to go forth and be financially successful after a bankruptcy should be the goal of an ethically managed bankruptcy law firm. At Joseph Wrobel, Ltd., we want you to succeed and send us referrals, and hopefully you won’t need to file another bankruptcy of your own in the future. We work to share information and encouragement to those who ended up in a financial bind and really do wish all our clients the best in future financial success.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’s Facebook page and Follow Joseph Wrobel. Ltd. on Twitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by calling (312) 781-0996 to talk to an attorney today.

Steps to a new home after bankruptcy

Yes, you can get a new mortgage loan or refinance after bankruptcy but it will take some patience and planning. Most lenders suggest you wait at least two to three or sometimes four years after your bankruptcy discharge to get into a new home loan. There are several options for post-bankruptcy home buyers such as FHA and VA loans, USDA loans and conventional loans.

FHA and VA loans are available two years after the date of a Chapter 7 discharge or after 12 months of timely payments on a Chapter 13 bankruptcy. Bankruptcy court approval is necessary to get the loan and you must explain the bankruptcy in the process. USDA loans require a three-year wait from a Chapter 7 and the same 12 months of timely Chapter 13 payments, with court approval. The conventional loans are four and two year waiting periods after Chapter 7 and 13 respectively.

Use the waiting time to get your new financial habits and savings in order.

Right after bankruptcy you may feel like the pressure is off and there may be disposable income for the first time in a while. Of course, there is a tendency to want to spend that extra money on the things you could not buy or do when under financial pressure before bankruptcy. Go ahead and splurge for a little while then pull in the purse strings and prepare to get credit worthy.

Take steps to establish your good credit habits. Start with a budget of all fixed monthly expenses and make a plan for how income will be spent every month. The most important thing you can do after a bankruptcy is not to get into any new unnecessary debt. It can take time to get used to living without things you do not really need and you may learn to really appreciate not feeling the stress of needing so many extras. Even buying more groceries and cooking from home instead of eating out is a habit that can save lots of money for future uses.

Money saving habits are contagious and good habits tend to spread.

Saving money is a habit, and it can be tough to learn. An easy way to save is to tuck money way automatically without being able to spend it. Open a savings account at your bank or credit union and set up an automatic online transfer of some amount of money to pull from your checking account right on or after payday deposits. You can also go to your human resources department to find out how easy an automatic withholding can be taken from your paycheck and directed to your savings.

Saving money and watching it grow is rewarding. When you start seeing lower interest rates, frequently paid bills and savings growing you may just keep trimming expenses and taking steps to increase income and savings. The fruits of our efforts help keep us motivated to be financially successful. In addition to saving money and avoiding further debt, credit management is necessary because you will need to qualify for a new mortgage like anyone else.

Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start. To keep in touch and read about consumer finance news and stories you can Like the firm’sFacebook page and Follow Joseph Wrobel. Ltd. onTwitter. If you need immediate legal assistance, please call Joseph Wrobel, Ltd. by dialing (312) 781-0996 to talk to an attorney.