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New Bankruptcy Laws - What They Mean to Consumers

With the new laws that went into effect in October 2005, many consumers are finding it more difficult to file Chapter 7 bankruptcy. Under the old laws, consumers could file Chapter 7 and wipe out most of their unsecured debt completely.

Under the new laws, they must first attend counseling, which helps determine if they can file Chapter 7 or Chapter 13. Most higher-income consumers will be forced to file Chapter 13, which is a debt repayment plan that doesnt wipe out the debt until the repayment plan is finished.

Speciality lenders will loan to borrowers in a Chapter 13 plan. The first test is the borrower must have paid on time to the trustee for at least six months. Some lenders want at least 12 or 18 months with no late payments. The next step is to get approval to pay off the chapter 13 plan from the trustee handling your case. The test for approval is the refinance must show a benefit over the current payment plan. If approved, the lender will need to see the trustee approval. The rest is a combination of credit score, ltv, and income with the specialty bankruptcy friendly lenders willing to lend with scores in the 500's with homes that have a high amount of equity.

There are some lenders who are willing to lend as soon as one day after bankruptcy has been discharged.

You can still pay off your Chapter 13 bankruptcy through a refinance. Many lenders have programs that allow you to pay off your Bankruptcy using the equity in your home.

For more information regarding this topic, please call Mike Williams at 516-921-9000 or email mwilliams@northshorefunding.com.