Bankruptcy, Foreclosure and HARP 2.0

Bankruptcy, foreclosure and HARP 2.0 can all be linked to decisions regarding your home.  This article is intended to provide a simple overview of each and how they can potentially impact each other.  Historically, questions about bankruptcy and foreclosure are quite common, so we’ll address those two first.  Both are cases associated with individuals or businesses experiencing financial problems and the potential of losing their homes.  However, the two are very different types of legal proceedings with different objectives and outcomes.

Bankruptcy vs. Home Foreclosure:  

The filing of a bankruptcy directly affects foreclosure, underscoring the primary difference between these two types of proceedings.  (Both processes will affect your credit score for up to 10 years, but for many people in financial hardship, bankruptcy can actually be the quickest way to a
credit score.)  As soon as bankruptcy is filed, the bankruptcy court issues what is called an “automatic stay” which requires the suspension of foreclosure proceedings. In Chapter 7 Bankruptcy property you own can be taken, liquidated, and sold in order to pay back your debts.  Chapter 7 may not provide long-term protection from home foreclosure, but the “automatic stay” will at least buy some time.  On the other hand, Chapter 13 Bankruptcy can actually save your home.  If you qualify, this type of bankruptcy sets up an interest free 3-5 year repayment plan that can help you become current on mortgage payments.  More information about bankruptcy.

Simply put, foreclosure is the loss of your real estate, including your home.  It’s not a good situation for anyone involved.  The foreclosure process can begin with just one late payment.  Just 90 days from your “missed payment” notice you’re likely to receive a “notice of default.” How quickly a lender can foreclose on your home differs by state.  Read your notices carefully.  Bankruptcy can be a good alternative, but don’t wait too long.  Contact a bankruptcy attorney as soon as possible to save your home.

Qualify for HARP 2.0 after bankruptcy: 

If you’re up to date on your mortgage payments but have little to no equity in your home, you may be eligible to refinance through HARP 2.0. (Home Affordable Refinance Program)  The program is designed to create a newer, more stable, and sometimes more affordable mortgage loan.   Many are surprised to know that you can still qualify for HARP 2.0, even after filing for bankruptcy.  According to Fannie Mae guidelines, there is no allotted waiting period to apply for HARP after a bankruptcy or foreclosure.  (Freddie Mac usually follows the same policies, as Fannie Mae, but there may be differences.)  Typically, as long as your mortgage payments have been current for the past six months, there have no delinquencies exceeding 30 days for the past 12 months, and you meet the other criteria, you have a decent chance to qualify.

At Debt Advisors, we will review your situation and help you arrive at decisions that are best for your circumstances. For more detailed information about home foreclosure and bankruptcy in Wisconsin, visit our home foreclosure resource center

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