Home Equity Loan after Bankruptcy?

[Elexismc]

Hi all! Just trying to gather some general information. I am awaiting discharge of my Chapter 7(should be early next month) and I am curious to know if it is possible(years from now) to obtain a Home Equity Loan having not reaffirmed my mortgage and with a bankruptcy reporting? I searched with no definitive answer pertaining to not reaffirming the mortgage, only that it's generally possible to get one after bankruptcy.(no mention of how long to wait etc) I am just trying to get as much information as possible on all aspects of rebuilding/obtaining credit/loans after bankruptcy. I have already learned a lot from reading these forums and unfortunately included most of the cards recommended in the bankruptcy to 700 thread so I know it won't be an easy journey for me. I am still optimistic that I will get there eventually!

[ezdriver]

NO. With a default and discharge on the 1st mortgage, you no longer have any interest in the house to use as collateral for any loan. Not until you pay off the 1st mortgage and get the deed free and clear.

[Elexismc]

Well that stinks-the house is literally worth twice as much as when I bought it now-thanks for the info!

[ezdriver]

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@Elexismc wrote:
Well that stinks-the house is literally worth twice as much as when I bought it now-thanks for the info!

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Hmmmm ... so if it is worth more than the mortgage balance owed, is there a reason why you did not sell it prior to filing for bankruptcy? Now that the mortgage balance has been discharged, the mortgage lender will have control over the disposition of the property. That said, my thought is that, should you come up with a potential buyer, you may want to contact the lender and present a proposal of sale. Remember that your name remains on the deed until the house is sold or the lender forecloses on it.

Tough spot to be in but don't give up too easily.

First, what is the basis for your valuation of the property? Realtor CMA? Apprailsal?

Have you had any interest from any potential buyer?

Why not plan to stay in it until the mortgage balance is paid off?

The questions are simply for brainstroming purposes.

[StartingOver10]

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@ezdriver wrote:

NO. With a default and discharge on the 1st mortgage, you no longer have any interest in the house to use as collateral for any loan. Not until you pay off the 1st mortgage and get the deed free and clear.

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EZ, this isn't quite correct.

If the OP was current at the time of filing BK 7 he can continue to reside and pay for the mortgage and keep the equity in Florida (primary residence only - unlimited equity allowed).  Other states have different parameters. Some states severely limit the amount of equity allowed in the property. Check the BK exemptions for your state.

The OP can refi his loan four years after BK if he has re-established his credit and he can show that the payments were on time. Two years with extenuating circumstances.

The mortgage lien remains on the property until it is either paid off, refianced or sold or foreclosed (in the case of non-payment).

[StartingOver10]

A HELOC will be more difficult to get after a BK. The OP may need to refi the entire loan so the new lender has a first mortgage.....

[Elexismc]

I am residing in the property and maintaining the payments. I did not reaffirm the loan per my lawyers advice but was allowed to exempt the equity in the house(I'm in CT). The trustee said even though my actual equity(real estate agent did a market analysis) was more than the exemption, the amount it would cost to sell the home and pay off the 1st mortgage and down payment assistance loan(basically a 2nd mortgage) there would not be enough to distribute to my creditors so I was able to exempt all the equity. I have every intention on staying in the house for a long time(after its paid on and beyond-I love where I live) I was just asking in terms of the future-if it was possible- to borrow against the equity for home improvements/maintenance  if I wanted to. It was a thought that popped into my head and I realized I couldn't really find much concrete info on this particular subject anywhere during my searches.

[StartingOver10]

Looking at the derogatorty matrix for BK's - on a conventional loan it is 2 years from discharge date with extenuating circumstances and 4 years without extenuating circumstances.

Keep a record of each payment you have made on time (canceled check or bank statement) You will want to make sure to make the payments on or before the due date.

Although banks allow a 15 day grace period - there are internal measurements for payments made days 6-10 and 11 - 15 of the month, kwim?

You will want to be squeeky clean after a BK.

The further away in time that you get from the BK the more likely a HELOC is possible. To expect to do one after 2 years...I think would be difficult if not impossible. After 4 yrs, maybe. You would have better luck with a smaller lender IMO.

[Elexismc]

Thank you that is awesome information...I was definitely not thinking anything sooner than 2-4 years(more towards the latter) if at all-just trying to obtain all the info I can for most circumstances I may face in the upcoming years during my rebuild. Thank you again!

[StartingOver10]

Remember to wait 4 years and one day before you apply for a new mortgage. The time frame is specific. The clock starts from your discharge date to the new application date. They are picky when it comes to the dates...sounds like you did the right thing in keeping your home.