How does bankruptcy affect qualification for a mortgage?
How does bankruptcy affect qualification for a mortgage?
Bankruptcy is a legal procedure for individuals (and, in some cases, businesses) to get out of debt. The most common form of bankruptcy is Chapter 7, and the rules surrounding it have changed recently. In the past, Chapter 7 bankruptcies could affect qualification for a mortgage in several ways, but they can no longer disqualify you from getting one.
Qualification for a mortgage is affected by bankruptcy if you file Chapter 7 or Chapter 13. The main issue that arises with bankruptcy is the loss of collateral. Bankruptcy law allows the debtor to keep certain assets so long as they are exempt and not included in their plan. These assets are usually exempt for all kinds of reasons. but most commonly it is because there is a legal obligation to provide for another person (like a spouse) or there is an important family purpose (like primary residence). If your bankruptcy plan does not include these exempted assets, you will be unable to use them as collateral on a mortgage application. If a lender finds out that you are planning on using them as collateral, they may decline your application because they do not want to take on the risk that you will lose these assets and then default on the mortgage payment.
If you have any questions or need a Bankruptcy Lawyer, please call this law firm for a free consultation.
Ascent Law LLC
8833 S Redwood Road Suite C
West Jordan UT 84088
(801) 676-5506
