Homeowners in Arizona and across the nation may still pay their mortgages after bankruptcy. After filing for bankruptcy, including Chapter 7 bankruptcy, an individual may wonder if they can refinance their home loan if they remain in their house. The answer will generally depend on the specific circumstances of each individual homeowner. If a court discharges a mortgage in bankruptcy, the lender will still have a lien against the house. An owner who fails to pay a house loan risks foreclosure, even if the mortgage loan was discharged in bankruptcy court. Conversely, a homeowner who makes timely payments to a mortgage lender after bankruptcy may ultimately repay the house loan and own the house clear of a mortgage lien. Even when owners make timely payments, some lenders may accommodate a request for mortgage modification if the court discharged the mortgage in bankruptcy. Owners can try to contact other lenders to determine if they can get a new loan.
Some courts allow debtors to file a motion to re-open a bankruptcy case to reaffirm a mortgage loan, even if the time to do so has passed. Whether the court will agree to accept this motion may depend on the state and the particular bankruptcy court.
Homeowners who are able to reaffirm their mortgages in bankruptcy court may be able to refinance the loan, but the process may have risks. In the states that allow lenders to pursue deficiencies after a foreclosure, a debtor may risk an action by a lender to recoup any loan deficiencies in the event that the owner cannot make timely payments.
Mortgage refinancing is one of the issues that some individuals may face after getting a fresh financial start through bankruptcy. An attorney who specializes in bankruptcy law and debt relief may be able to advise an individual about their rights and obligations.
Source: Fox Business, “Kept home after bankruptcy, can I refi?”, Justin Harelik, October 11, 2013