Bankruptcy and Short Sale

MY response to J. would be to call who *I* always call with these questions. My personal mortgage and a lot of my clients (and all of my co-workers at my last brokerage office) relied on Steve Hochhalter, of Pacific Coast Mortgage, for answers to these “what if…” questions. He recently folded his company into MagniFund to have access to better customer service for his clients. If J. is interested I can make an introduction. He is generally pretty accessible and I trust my own life with his advice.
Wendy Hughes-Jelen
Designated Built Green® Certified Professional: Real Estate Agent
Voice/Fax 206.686.HOME (4663)

Here is a link to a publication by the Oregon State Bar giving general information about bankruptcy, including information for how long it will stay on your credit report.
http://www.osbar.org/public/pamphlets/bankruptcy.html

bankruptcy and short sale

A few things:
1st you are not the only one going through this. There are thousands of families going through this and more to come, so know that you are not alone.
2nd it generally takes 7 years to come off of your credit report and shorter in some states, depending on what the law is where you filed
3rd they are looking at redoing the entire credit reporting system in the next 6-12 months so everyone will most likely get a do-over on their credit reports as most people look pretty bad right now.

Please know that this to shall pass and that you made the right decision for your family.

I hope this helps.

God Bless,
C.

Hi J.,

The biggest question I have is about the short sale - most lenders (especially if there was a second lien on the house) don't actually forgive the debt - it's just no longer secured by real estate. Unless consumers know to negotiate with the lender that they want the "deficiency released" it may still be showing up on your husband's credit report EVERY SINGLE MONTH as a deficiency. You can imagine what that does to his credit if that's the case. Ouch!

Right now (and underwriting guidelines change all of the time) a borrower cannot qualify for a FreddieMac/FannieMae loan with a bankruptcy in the last 7 years and a short sale/foreclosure in the last 5 years. (I think....like i said it changes.) But the big thing is going to be checking in on whether or not there is a deficiency being reported on your husband's credit score - that'll do as much damage (if not more) than the other events.

Good Luck!

When we had filed bancruptcy a few years back, we were told 2-3 yrs before a bank would even look at a mortgage loan. This is only if you do everything right, pay all bills on time. The bancrupcy is still on your credit report (7yrs), so you may have a higher interest rate and may have to go in depth on why you filed in the first place.

Hi J.,

It generally takes 7 years to get anything completely off of your credit report. I'm not sure about Chapter 7's, but with other bad marks there are ways to try and get things off sooner, but there are hoops to jump through. You can try going to the individual credit agencies websites (Experian, TransUnion & Equifax), and disputing the mark on your credit report. If the bank or company doesn't respond within a certain amount of time, then they automatically take it off of your credit report. I don't know if that works with Chapter 7's though. Just thought I'd share the info.

Best of luck to you!

it used to be 7 years but now it's closer to 2 or 3 years. i have a friend who has been through bankruptcy twice and it was still only 2 1/2-3 yrs for her. good luck!

Look into owner carry contracts or lease option to purchase.It will limit your choices but live smaller and tighter...everything will mend in time.

Hi J.,
Sorry to hear that. I haven't been through what you are going through but I did have a client who was trying to get
financing for a home. He had wonderful credit...like 700+ but he had a bankruptcy two years ago disqualifying him for certain loans. So it is possible to get your credit scores back up but the foreclosure may haunt you for a while.
My advice would be to see a credit counselor and see what you can do to improve your scores quicker.
good luck

When my husband and I were younger we had to do a Chapter 13 and it took 7 years for it to clear off of our records. Now our credit is impeccable. We were able to keep our home during that bankruptcy and by the time we sold and wanted to buy another the 7 years had past. Your credit will not be doomed forever, but you must keep everything from this point on current if you want a new start.

Hi J.,

Sorry to hear about all that....you are certainly NOT alone! I used to do loans a few years back, before the big "crash", and BK's were always on the report and had an effect on qualifying for new loans for 7 years. I thought short sales were the same, but I can't remember now. Things may have chamnged since then, so I'm not sure if it's still the current guideline, but I have a co-worker that also still does loans, let me ask him today and I'll get back to you ok? But this too shall pass, and with SO MANY people in the same boat as you across our nation, lenders might be a bit more forgiving of a BK in your history with in a few years. Here's to hoping for that! ;-) ~A.