Table of Contents

11 min read Jun 02, 2023

Refinancing After Bankruptcy: Things to Know

Navigating the financial aftermath of bankruptcy can be challenging, but refinancing can offer a fresh start.

From understanding the impact of bankruptcy on refinancing options to rebuilding credit and finding lenders willing to work with post-bankruptcy applicants, this resource aims to provide valuable insights.

It can help individuals make informed decisions as they work towards improving their financial situation.

Can You Refinance Your Mortgage After Bankruptcy?

Yes, it is possible to refinance your mortgage after bankruptcy, but it may require some additional effort and time. The ability to refinance will depend on several factors, such as the type of bankruptcy filed (Chapter 7 or Chapter 13), the amount of time that has passed since the bankruptcy discharge, and your overall financial situation.

Here are some key points to consider when refinancing after bankruptcy:

  1. Waiting period: There is typically a waiting period after bankruptcy before you can refinance. This waiting period can vary depending on the type of bankruptcy and the loan program you’re applying for. For example, FHA loans typically require a waiting period of at least two years after a Chapter 7 bankruptcy discharge.
  2. Rebuilding credit: Rebuilding your credit is crucial after bankruptcy. Making timely payments on your current obligations, keeping credit card balances low, and avoiding new debt can help improve your credit score over time, making you a more attractive candidate for refinancing.
  3. Demonstrating financial stability: Lenders will want to see that you have stable income and can afford the new mortgage payments. It’s important to have a steady employment history and a low debt-to-income ratio to increase your chances of qualifying for a refinance.
  4. Finding the right lender: Not all lenders offer refinancing options to individuals with a bankruptcy history. Researching and finding lenders who specialize in working with borrowers who have experienced bankruptcy can increase your chances of finding suitable refinancing options.
  5. Higher interest rates and fees: It’s important to be aware that refinancing after bankruptcy may result in higher interest rates and fees compared to borrowers with good credit histories. However, as you continue to rebuild your credit, you may have opportunities to refinance again in the future at more favorable terms.

It’s advisable to work with a mortgage professional or financial advisor who can provide guidance tailored to your specific situation and help you explore refinancing options after bankruptcy.

Chapter 7 Vs. Chapter 13 Bankruptcies

Chapter 7 and Chapter 13 bankruptcies are two common types of bankruptcy filings in the United States. Here’s a brief overview of the differences between the two:

Chapter 7 Bankruptcies

  • Also known as “liquidation” bankruptcy.
  • Designed for individuals or businesses with significant unsecured debt and limited income.
  • Involves the sale of non-exempt assets to repay creditors.
  • Typically takes a few months to complete.
  • Provides a fresh start by eliminating most unsecured debts, such as credit card debt and medical bills.
  • Certain debts, such as student loans and child support, are usually not dischargeable.

Chapter 13 Bankruptcies

  • Also known as “reorganization” bankruptcy or a “wage earner’s plan.”
  • Intended for individuals with a regular income who can create a repayment plan to repay a portion of their debts over three to five years.
  • Allows individuals to keep their assets and develop a feasible repayment plan.
  • Requires making regular payments to a bankruptcy trustee, who distributes the funds to creditors.
  • Offers a way to catch up on missed mortgage or car loan payments while retaining ownership.
  • Debts remaining after completing the repayment plan may be discharged.

Differences Between Chapter 7 & Chapter 13 Bankruptcies

It’s important to note that this table provides a general overview, and the specifics of each bankruptcy case can vary.

#Chapter 7 BankruptcyChapter 13 Bankruptcy
PurposeLiquidation of assets to repay creditorsRepayment plan for a portion of debts
EligibilityIndividuals or businesses with limited incomeIndividuals with regular income
AssetNon-exempt assets may be soldAssets are retained, but a repayment plan is developed
DurationTypically a few months to completeThree to five years repayment period
Debt DischargeMost unsecured debts are dischargedRemaining debts may be discharged after the repayment plan
Exempt PropertyProtects certain assets from being liquidatedAssets are not liquidated as part of the repayment plan
Mortgage/Car LoansArrears on payments can’t be addressed directlyCan catch up on missed payments and keep assets
Debt LimitationNo specific limit on the amount of debtCertain debt limits apply
Means TestNot requiredRequired to determine eligibility
Legal FeesGenerally less expensiveGenerally more expensive due to longer process

Can You Refinance During A Chapter 7 Or Chapter 13 Bankruptcy?

Refinancing during an active Chapter 7 or Chapter 13 bankruptcy can be challenging and requires approval from the bankruptcy court. Here’s an overview of refinancing possibilities during each bankruptcy chapter:

Chapter 7 Bankruptcy: Refinancing options during an ongoing Chapter 7 bankruptcy are limited. Since Chapter 7 involves the liquidation of assets to repay creditors, refinancing typically requires permission from the bankruptcy trustee and court approval. Lenders may be hesitant to offer refinancing during this time, as it involves taking on additional debt. However, it may be possible to refinance after the bankruptcy is discharged, depending on factors such as creditworthiness, income stability, and the amount of equity in the property.

Chapter 13 Bankruptcy: Refinancing during an active Chapter 13 bankruptcy is possible, but it requires approval from the bankruptcy court. You’ll need to demonstrate that the refinancing will benefit your repayment plan and that you can afford the new loan terms. The court will assess factors such as your income, equity in the property

Waiting Periods: When Can You Refinance After Bankruptcy?

The waiting periods for refinancing after bankruptcy vary depending on the type of bankruptcy filed and the loan program you are applying for. Here are some general guidelines:

Loan TypeChapter 7 BankruptcyChapter 13 Bankruptcy
Conventional LoansAt least four years after the discharge or dismissal of the Chapter 7 bankruptcy before you can qualify for a conventional refinance.You may be eligible for a conventional refinance after making 12 on-time payments into your Chapter 13 repayment plan and receiving permission from the bankruptcy court.
FHA LoansThe waiting period is generally two years from the discharge date of the Chapter 7 bankruptcy.The waiting period is typically one year of on-time payments into your Chapter 13 repayment plan, with permission from the bankruptcy court.
VA LoansThe waiting period is typically two years from the discharge date of the Chapter 7 bankruptcy.The waiting period is typically one year of on-time payments into your Chapter 13 repayment plan, with permission from the bankruptcy court.

What Are The Benefits Of Refinancing After Bankruptcy?

Refinancing after bankruptcy can provide several benefits for individuals looking to improve their financial situation. One major advantage is the potential for lower interest rates. If your credit has improved since the bankruptcy filing, you may qualify for more favorable loan terms, resulting in reduced interest rates and substantial long-term savings.

Additionally, refinancing offers the opportunity to lower your monthly payments, providing immediate financial relief and improved cash flow. Debt consolidation is another benefit, as refinancing allows you to consolidate multiple high-interest debts into a single, more manageable payment, potentially reducing overall interest costs.

Refinancing can also contribute to rebuilding your credit score. By making timely payments on the new loan, you can demonstrate responsible financial behavior, which can gradually improve your creditworthiness over time. Furthermore, accessing the equity in your home through refinancing can provide funds for important expenses, such as home improvements or debt consolidation.

Lastly, refinancing after bankruptcy allows you to consider a shorter loan term, enabling you to pay off the mortgage faster and potentially save on interest. It’s crucial to carefully evaluate the costs and potential savings, and seek guidance from professionals to make an informed decision based on your specific circumstances.

Things to Know Before Refinancing After Bankruptcy

Refinancing after bankruptcy requires careful consideration and understanding of the process. Here are some key things to know before pursuing refinancing:

  1. Rebuilding Credit: Focus on rebuilding your credit after bankruptcy by making timely payments, managing existing debts responsibly, and monitoring your credit report. Lenders will assess your creditworthiness during the refinancing process.
  2. Waiting Period: There is usually a waiting period after bankruptcy before you can refinance. Familiarize yourself with the specific waiting period requirements based on the type of bankruptcy filed and the loan program you’re applying for.
  3. Eligibility Criteria: Understand the eligibility criteria set by lenders for refinancing after bankruptcy. Factors such as income stability, employment history, debt-to-income ratio, and loan-to-value ratio will be considered.
  4. Higher Interest Rates and Fees: Be prepared for the possibility of higher interest rates and fees when refinancing after bankruptcy. Your credit history and the perceived risk associated with the bankruptcy may result in less favorable terms compared to borrowers with better credit.
  5. Shop Around: Research and compare multiple lenders to find those who specialize in working with borrowers who have a bankruptcy history. Each lender may have different requirements and offers, so exploring your options can help you find the most suitable refinancing terms.
  6. Costs and Savings Analysis: Evaluate the costs associated with refinancing, such as closing costs, appraisal fees, and potential prepayment penalties. Compare these costs against the potential savings to ensure that refinancing makes financial sense for your situation.
  7. Financial Goals and Long-Term Planning: Consider your long-term financial goals and how refinancing fits into your overall financial plan. Evaluate whether refinancing aligns with your objectives, whether it’s reducing monthly payments, paying off the mortgage sooner, or accessing home equity for specific purposes.

Consulting with a mortgage professional or financial advisor who specializes in post-bankruptcy refinancing can provide valuable insights and guidance tailored to your circumstances. They can help you navigate the process, assess the costs and benefits, and determine if refinancing is the right choice for you.

Steps to Refinance After Bankruptcy

Refinancing after bankruptcy can be a beneficial step towards improving your financial situation. Here are the general steps to follow when considering refinancing after bankruptcy:

  1. Rebuild Your Credit: Focus on rebuilding your credit score by making timely payments on existing debts, keeping balances low, and maintaining a positive payment history. Monitor your credit reports regularly to ensure accuracy and address any errors.
  2. Assess Your Financial Situation: Evaluate your current financial situation, including your income, expenses, and debts. Determine if refinancing is a viable option based on your ability to meet the lender’s requirements and repay the new loan.
  3. Understand Waiting Periods: Familiarize yourself with the waiting periods associated with refinancing after bankruptcy. Different loan programs and lenders may have specific waiting periods, which vary based on the type of bankruptcy filed.
  4. Research Lenders: Look for lenders who specialize in working with individuals who have a bankruptcy history. Research and compare their offerings, including interest rates, fees, and eligibility requirements. Consider seeking recommendations or working with a mortgage broker who can connect you with suitable lenders.
  5. Gather Documentation: Prepare the necessary documentation for the refinancing application. This typically includes proof of income, bank statements, tax returns, and any additional documents required by the lender to assess your financial stability and creditworthiness.
  6. Submit the Application: Complete the refinancing application accurately and thoroughly. Provide all requested documentation and information to support your case. Be prepared to explain the circumstances of your bankruptcy and demonstrate your financial recovery since then.
  7. Work with the Lender: Communicate and cooperate with the lender throughout the process. Respond promptly to any requests for additional information or documentation. Stay engaged and proactive to ensure a smooth refinancing experience.
  8. Review Loan Offers: Evaluate the loan offers you receive from different lenders. Consider factors such as interest rates, loan terms, closing costs, and potential savings. Compare the offers to select the option that aligns best with your financial goals.
  9. Close the Loan: Once you’ve chosen a lender and reviewed the loan terms, proceed with the closing process. Sign the necessary paperwork, pay any required fees or costs, and complete the loan transaction.

Remember, the steps may vary depending on your specific circumstances and the requirements of the lender. Consulting with a mortgage professional who specializes in refinancing after bankruptcy can provide personalized guidance and support throughout the process.

Final Thoughts

Refinancing after bankruptcy can be a valuable opportunity to improve your financial situation and secure more favorable loan terms. However, it requires careful consideration and thorough preparation.

Rebuilding your credit, understanding waiting periods, researching lenders, and gathering the necessary documentation are important steps to take. Working closely with lenders and being proactive in the application process is essential.


1. Can I refinance after bankruptcy?

Yes, it is possible to refinance after bankruptcy. However, eligibility and waiting periods may vary depending on the type of bankruptcy filed and the loan program you're applying for. Rebuilding your credit and meeting the lender's requirements are key factors in determining your eligibility.

2. Will refinancing after bankruptcy improve my credit score?

Refinancing itself does not directly improve your credit score. However, making timely payments on the new loan can demonstrate responsible financial behavior and contribute to rebuilding your credit over time. Consistently managing your debts and maintaining a positive payment history will have a more significant impact on improving your credit score.

3. What are the benefits of refinancing after bankruptcy?

Refinancing after bankruptcy can provide advantages such as lower interest rates, reduced monthly payments, debt consolidation, access to home equity, improved financial flexibility, and the opportunity to pay off the mortgage sooner. However, it's essential to carefully evaluate the costs, fees, and potential savings to ensure that refinancing aligns with your financial goals and overall financial plan.


Save $20

On Silver & up plans

Use Coupon Code:

Need help? Call us on
(844) 448-0110