Life After Bankruptcy

FHA Trims Waiting Period for Borrowers Who Experienced Bankruptcy

2013 August 20 by

The Federal Housing Administration (FHA) is allowing borrowers who went through a bankruptcy, foreclosure, deed-in-lieu, or short sale to reenter the market in as little as 12 months, according to a mortgage letter released Friday.

Borrowers who experienced a foreclosure must wait at least three years before getting a chance to get approved for an FHA loan, but with the new guideline, certain borrowers who lost their home as a result of an economic hardship may be considered even earlier.

For borrowers who went through recession-related financial event, FHA stated it realizes “their credit histories may not fully reflect their true ability or propensity to repay a mortgage.”

In order to be eligible for the more lenient approval process, provided documents must show “certain credit impairments” were from loss of employment or loss of income that was beyond their control. The lender also needs to verify the income loss was at least 20 percent for a period lasting for at least six months.

Additionally, borrowers must demonstrate they have fully recovered from the event that caused the hardship and complete housing counseling.

According to the letter, recovery from an economic event involves reestablishing “satisfactory credit” for at least 12 months. Criteria for satisfactory credit include 12 months of good payment history on payments such as a mortgage, rent, or credit account.

The new guidance is for case numbers assigned on or after August 15, 2013, and is effective through September 30, 2016.



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Refinancing Your Home Mortgage After Chapter 7 Bankruptcy

2013 April 9 by

As a Denver bankruptcy lawyer, I have been receiving multiple calls from clients who filed bankruptcy a few years ago who are now eligible to re-finance their current mortgage or purchase a home.

The mortgage lenders and brokers frequently ask my clients “Did you reaffirm the mortgage?”

Wells Fargo, in particular, has been offering our past clients refinancing of their mortgage only to deny it later because a reaffirmation agreement was not filed in the bankruptcy case.

Wells Fargo tells our clients that they’ll approve them for a re-finance if they will file a reaffirmation agreement in their two-year-old chapter 7 bankruptcy case. Unfortunately, this is not an option. Once the bankruptcy discharge has been issued by the court, the court cannot approve a reaffirmation agreement.

Our solution: If you cannot re-finance with the mortgage lender you had when your bankruptcy was filed, apply with a different lender.

Our contacts at First Option Lending have recently told us that an individual who filed chapter 7 over 2 years ago is eligible to re-finance their mortgage now if they have not missed any mortgage payments and otherwise qualify. You don’t need a reaffirmation agreement to re-finance if your have a stellar payment history and your income is steady and verifiable.

It is common practice for bankruptcy attorneys to advise their clients to not reaffirm their mortgages and other debts. A Reaffirmation Agreement is an agreement made between the debtor (our client) and a creditor (like Wells Fargo) to agree to pay a debt that would otherwise be discharged (forgiven) by the bankruptcy.

The agreement is a court-approved new post-bankruptcy contract with the creditor. It gives back the lender the right to sue our clients (including wage and bank garnishment) if they default in the future.

How can a bankruptcy attorney advise his client to put himself or herself in that situation? Especially today when an astounding number of homes are underwater and the economy is so uncertain.

The benefits of signing the reaffirmation agreement are outweighed by the risks.

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2012 February 16 by

As we covered in the February 2011 Bankruptcy Law Professionals in Bankruptcy Myth #1, filing for bankruptcy does not necessarily hurt your credit. The bankruptcy will be reported on your credit file for up to 10 years. Bankruptcy gets rid of or manages your debt, so it should be considered the first step in rebuilding your credit. Here are five steps you should take to start repairing your credit after filing for bankruptcy.


If you don’t have a recent copy of your credit report, get one from a reputable online source such as Annual Credit Report – it should be free once a year. If you see any errors, work on disputing that information directly with the companies. And make sure any debt that was part of your bankruptcy case is designated with a “BK” notation. Remember that you must exercise some patience here. It can take several years for your credit slate to be completely clean. You didn’t become bankrupt overnight, so you can’t recover it from it that quickly either.


It’s time to get some positive credit activity going on your credit report to show that you are responsible and are ready to pay bills on time. You likely won’t get great offers and will have to pay higher interest rates, but you’ll use the cards sparingly. Consider making one small purchase a month, like a tank of gas, then pay it off with each bill. Don’t ever max them out, as your credit score goes up or down based on your ratio of outstanding credit to available credit.

You might start with your bank – ask if they have a “collateral” card program, which means you put money into an account up front and card purchases are taken out of that. It’s low-risk for the bank, but can help you improve your credit score.


Talk to your bank or credit union about getting a small loan, such as $500. These loans do have high interest rates, but they offer you an opportunity to pay them back in monthly installments, which looks good to creditors. Be very diligent about making payments on time. Consider setting up automatic payments that come directly out of your checking accounts at a set time each month.


This might seem like an odd step to take, but you cannot afford to have anything else major go wrong with your finances. An identity theft could be detrimental to your credit recovery. eHow Money has a helpful article on comparing identity protection programs, which is an excellent place to start.


It probably goes without saying, but a major part of recovering from a bankruptcy is to avoid getting right back into old ways. Look into one of the free online services that help you set budgets and goals, like After some set-up on your part, Mint will automatically update with real-time bank account and credit card information, so you can see exactly where you’re spending. You can enter monthly budgets and it will send you alerts if you’re getting too high in a category. Mint also helps you set up Goals, such as paying off credit cards, buying a car, or paying off a loan.

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Tips on Getting a New Car After Bankruptcy

2011 March 16 by

One of the hardest purchases to make after filing for bankruptcy can be a car. But sometimes you simply need reliable wheels — whether it’s to replace a vehicle in need of expensive repairs or to use as transportation to and from a new job. And buying a car and making payments on time can be an excellent way to improve your credit. Continue reading »

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Is Bankruptcy a Taxable Event?

2011 March 15 by

Bankruptcy is not a taxable event, per IRS Publication 908. The protection you receive from creditors after filing bankruptcy applies to the IRS as well. So the amount of discharged debt cannot be considered part of your income, which would normally be taxable.The IRS states “Generally, when a debt owed to another person or entity is canceled, the amount canceled or forgiven is considered income that is taxed to the person owing the debt. If a debt is canceled under a bankruptcy proceeding, the amount canceled is not income.”

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Denver Family Fun on a Budget

2011 March 11 by

If your family is on the lookout for ways to stay entertained without spending a bundle, you’ll appreciate these ideas:Groupon — a daily coupon with big savings on movies, restaurants, sporting events, outdoor activities, shopping, and more. Sign up for daily email coupons.LivingSocial Denver Family Edition — family-friendly deals at local zoos, museums, aquariums, art classes, and more. Sign up to receive emails with great coupons. Continue reading »

The Lighter Side of Money Problems

2011 March 8 by

Although it may not seem possible to laugh about having financial problems, it might be a healthy release and a good coping skill. It never hurts to laugh at yourself – it helps you get through it, improves your blood flow, releases endorphins, and reduces stress. For a funny take on financial troubles , check out the movie Fun with Dick and Jane. Continue reading »


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Tired of Getting Credit Card Offers?

2011 March 4 by

It can be difficult to resist the temptation of the credit card offers that land in your mailbox every week. If you’d like to stop receiving these offers, check out, the web site that accepts and processes consumer requests to opt-out of credit and insurance offers for five years or permanently (your choice). Continue reading »

Save Money and Time With

2011 February 28 by

My wife and I have five kids so we spend a small fortune on groceries every month. About a year ago, while driving down the highway to court, I was listening to the Dave Ramsey Show. He was promoting E-Mealz as a way to save on your food budget. My wife and I decided to give it a shot. Anything that would help us plan meals and shop for them (especially with five kids) is worth $5/month. Continue reading »

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