Q&A With Darrin: Can I Refinance During Bankruptcy?

Q. — I recently filed for bankruptcy protection. Is there any way I can refinance my first mortgage even though my bankruptcy has not yet been discharged? I have about $30,000 in miscellaneous debt that I need to consolidate and I’m at my wit’s end.
A. — Unfortunately, your bankruptcy needs to have been discharged for a minimum of two years before you’ll be able locate a lender willing to work with you.  In addition, you also need to make strides at reestablishing credit and have no missed or late payments for a minimum of 12 months.

A major key to reestablishing credit after a bankruptcy filing is to utilize some form of credit as soon as possible. While your bankruptcy will stay on your credit file for up to seven years, it is possible for you to qualify for an “A” rate mortgage after two years of consistent, on-time payments to all of your creditors.

One of the biggest challenges you face after filing for bankruptcy protection is that you want to establish new credit without digging yourself into a new hole. It’s important for you to do a thorough self-examination and determine what your weaknesses are. If you consistently find yourself unable to control your spending, reestablishing credit by obtaining a wallet full of credit cards isn’t the way to go. Otherwise, you simply run the risk of repeating history and finding yourself in the same financial position in a few years.

If you can’t trust yourself to avoid repeating history, it might be better to avoid using unsecured credit cards or other instruments of debt that can kill your financial future. A wise man once said, “He who fails to learn from the mistakes of his past is resigned to repeat them in the future.”

I recommend you take this time to work on your credit and examine ways that you can prevent repeating some of the mistakes of your past. We all make mistakes — and I make more than my share of them (just ask my wife!) — but the key to growth, especially when dealing with finances, is to learn from those mistakes and promise yourself that you’ll make smarter financial decisions in the future.

It can be difficult overcoming financial problems, but budgeting and setting limits for yourself can dramatically increase your odds of reaching your financial destination and having more money in your pocket when you get there.

Need to unlock your home's equity - but have a few questions? Why not consider a free private email consultation with me, Darrin Roseborsky? There's no obligation or commitments to worry about. Just helpful answers to your questions. Use the short form in the top-right corner to get started. And in a few minutes, you'll have the answers to all of your questions.