Bankruptcy provides many people with a chance to start over after suffering from financial troubles. California residents might find that a Chapter 13 repayment plan allows them to escape from some crushing debt while meeting certain obligations to creditors. However, exiting bankruptcy does not mean there’s no record; a credit history will display a bankruptcy filing for several years. For some people, that could create challenges when hoping to refinance specific loans.
Attempts to refinance after bankruptcy
Refinancing a mortgage might be a top option among those exiting bankruptcy as higher interest rates could cause financial strain. It’s normal to expect some hurdles when refinancing after bankruptcy, but overcoming those stumbling blocks is possible.
Ultimately, a bankruptcy will fall off a credit history in time, but a former filer may wish to refinance far sooner. Likely, it may take some time before some lenders choose to work with someone who filed for bankruptcy.
Lenders may be more willing to work with someone who filed for Chapter 13 since this type of bankruptcy involves payment plans. Chapter 7, also known as liquidation bankruptcy, could make lenders more concerned when reviewing applications. However, would-be refinancers might wish to move forward seeking a lender and not feel discouraged.
Exploring bankruptcy options
Filing for bankruptcy might not be someone’s first choice to deal with excessive debt. However, when meeting payment obligations proves impossible and financial struggles make life difficult, the bankruptcy courts could provide solutions.
Significant differences exist between Chapter 7 and Chapter 13 bankruptcy, and Chapter 7 requires passing a means test to qualify. Would-be filers should review their options before taking steps to seek bankruptcy protection.