Are you interested in filing bankruptcy in Arizona? This article should provide some helpful information, including how a bankruptcy will affect your credit and your ability to purchase a home or refinance the home you already have.
Disclaimer: We are not attorneys; we are mortgage brokers. The following article should not be considered legal advice under any circumstances. Before making any decisions about filing, consult a licensed Arizona bankruptcy attorney for legal advice. All of the information contained on this page should be very useful to anybody who wants the bottom line when it comes to bankruptcy and mortgage loans.
If you are like most Americans considering bankruptcy, you are probably going through a great deal of stress right now. Perhaps you feel that filing bankruptcy makes you a bad person or “dishonest” in some way. Many of our clients have told us they feel guilty about filing bankruptcy, as if it makes them un-American or so-called “deadbeats.”
To be honest, there are definitely some people who take advantage of our system and file bankruptcy dishonestly, but the majority of filers are just typical, hard-working Americans who have fallen on difficult times.
Bankruptcy Myth #1: Your credit will be ruined for seven years. You won’t be able to buy an automobile or get a credit card! You won’t be able to rent a car! You won’t be qualified to get a mortgage! You won’t be able to refinance. And so on and so on and so on…
These are all myths.
The truth about bankruptcy is that, in many situations, it will help your credit. Especially if your score is very low right now, (less then 500 for example), and you have a mountain of debt. Your credit score will go up after you file bankruptcy, often very quickly, as long as you do your part. Read more about doing your part in the next section of this web page.
Bankruptcy Myth #2: People who file bankruptcy are irresponsible and careless with their personal finances.
This is just silly.
It could mean the person has gone through a great personal tragedy– a terrible sickness, the loss of a job, or becoming a widow, just to give a few examples. It could mean the person was a senior citizen who was swindled out of their retirement, as has been known to happen.
Currently, the state of the U.S. economy is causing many people to file bankruptcy; many people who never imagined they would have to do something like that. Many honest Americans have been backed into a corner and have no other choice but to do so.
Of course, we do not want any of our clients to ever have to file bankruptcy– it makes it more difficult for us to help you in the short term– but when we feel strongly that bankruptcy is our client’s best option, we will be honest with our client.
Bankruptcy Myth #3: You can hide your assets from the court before you file bankruptcy.
If someone tells you that you can just put all of your money into a friend or relative’s bank account before you file, they are giving you very bad advice. If anyone tries to convince you that committing perjury to the bankruptcy court is a good idea, please dismiss this foolishness.
When you file bankruptcy, you need to document your financial situation very accurately to the Arizona bankruptcy court, and if anything looks fishy, you will find yourself in a great deal of trouble. In addition, your bankruptcy will be tossed-out by the court. It’s a very bad idea.
With VA and FHA loan programs, you can qualify for a mortgage two years after the date of your bankruptcy discharge, as long as you make attempts to show that you can pay your bills on time, every time, after the date of your discharge. If you were discharged in January of 2009, we can take your application in January of 2011.
Important: The discharge date is not the same thing as your bankruptcy filing date. The discharge date typically occurs about three months or 90 days after you file, as long as you provide the court with all of the documentation that they require from the beginning.
For a conventional, conforming Fannie Mae mortgage, you need to wait four years after your bankruptcy discharge date.
A conventional, conforming mortgage is just your basic mortgage, the loan that most Americans have been getting from their local bank for years.
This is because FHA loans have lower maximum borrowing limits, and when home prices had risen so dramatically, FHA loans were not adequate to finance most homes– especially in Phoenix.
However, with a current FHA maximum limit of $346,250 in Maricopa County, the FHA loan has quickly become the most common loan for Arizona home buyers.
1. If you have multiple debts when you get ready to file bankruptcy, only file bankruptcy on the debts that you absolutely need to.
Many people figure that if the court will allow them to wipe out every debt, than they should wipe out every debt. This is incorrect. If you have a $50,000 medical bill and a $500 credit card debt, consider keeping the credit card so that you can maintain some credit and rebuild your score.
Who will give you a credit card or a loan after you’ve already proven you’re a bad risk? The trick is to keep one or two debts out of your bankruptcy and use those to show that you can keep long term debt and pay it back in good faith.
2. And the debts you choose to keep? Be sure to pay them on time, every time. If you think that may be a problem, ignore #1, and just go ahead an put everything into your bankruptcy.
If you have a car payment, like most people, this is an even better way to build credit. A credit card could, in theory, cancel your account at any time, but a car is always your car as long as you pay on the note.
After about two years of good payment history, even with the bankruptcy, you can improve your credit score, get an FHA mortgage, and basically get your credit life back on track.
We have seen people just a few years out of bankruptcy with excellent credit scores! (Those who follow good post-bankruptcy advice, of course.)
3. Now two years have passed and you have kept some credit, had some new credit issued, and finally, have waited long enough to get a well-deserved FHA loan. Congratulations!
Fill out an online mortgage application or give us a call at (602) 618-6897
We hope this article was of some use to you. If you would like to read about the rules and requirement for filing bankruptcy, visit the U.S. Bankruptcy Court here.