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Bankruptcy Law/mortgage bk 13 and credit worthiness

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Expert: - 9/28/2006


Question
I read from a expert in real estate investments regarding bk chapter 13 which I beleive maybe in error. IN essence the real estate guru stated that the after 4 years of a chapter is discharge mortgage lenders will lend on conventional mortagage. however  with chapter 13 the clock for the four year period didnt start till after the payment period ended and the discharged was filed which could be up to"A consumer can file for Chapter 13, pay it off over five years, and then have it discharged. If the consumer then wants a conventional Fannie Mae or Freddie Mac mortgage, she must wait for that four year period to pass. Five years in Chapter 13 and four years waiting period equals nine years.

that makes no sense given that credit agencies must remove negatives after 7 years. This guru is suggesting it could up to 9 years? So what I want to know would the chapter 13 extend my negative to the end of the payment period when there is a discharge or 7 years after first filing?  

Answer
I think the "rules" on this are ambiguous. I believe that the Chapter 13 case can remain on a person's credit record throughout the entire time that the case is open, and for 10 more years after the case is closed. Many cases last for as long as 5 years, and the debtor will likely have the bankruptcy on their credit report for 10 more years after that.

As far as real estate loans are concerned, I believe that lenders will disregard the bankruptcy and make a conventional loan so long as the bankruptcy has been closed for 2 years, and that the borrower is otherwise qualified for the loan. The best way to find out is for you to talk to a couple of mortgage brokers.  

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Los Angeles Bankruptcy Lawyer Leon D. Bayer

Expertise

Leon Bayer has successfully represented clients in bankruptcy for over 30 years. He is frequently called upon by the media, the California Bar and other associations to provide insight and help educate attorneys on bankruptcy issues. If you or other readers want to keep up with my blog postings about life in and out of bankruptcy, you can follow my blog at http://www.bankruptcyblogger.org/ and my personal web site at http://www.debt-relief-bankruptcy.com and A Human Guide to Bankruptcy at http://www.thebankruptcyguide.net/ Leon also writes about bankruptcy law for Nolo, see http://www.nolo.com/law-authors/leon-bayer.html and his "Ask Leon" bankruptcy law blog column at http://blog.nolo.com/bankruptcy/

Experience

Leon is a Certified Specialist in Bankruptcy Law by the State Bar of California, and has been a practicing bankruptcy lawyer in Los Angeles, California for 33 years.

Organizations
National Association of Consumer Bankruptcy Lawyers, California Bar Association, Los Angeles County Bar Association.

Publications
Author, ?The Essentials Of Chapter 13,? Daily Journal Report, December 18, 1987.
Contributing Editor, Basic Bankruptcy, California Practice Handbook, Matthew Bender 1992, 1993.
CEB Consultant, CEB-Personal and Small Business Bankruptcy Practice in California, 2003.


Education/Credentials
B.A., J.D.

Awards and Honors
President, 1995-1996-Los Angeles Bankruptcy Forum; Member - Los Angeles County Bar Association Committee on Commercial Law & Bankruptcy, 1988. Law Advisory
Commission-Personal & Small Business Bankruptcy Law of the State Bar of California, 1996-2000

MR. BAYER SAYS: The big banks and credit card companys have been working overtime for many years to undermine the Consitutional right of the American people to be able to claim bankruptcy protection. In 2005 the banking lobby successfully convinced Congress and the President to make the laws and proceedures more complicated, hopeing that it will stymie legitimate people from filing bankruptcy. They succeeded in gaining these complex new legal proceedures by greasing the legislative system with hundreds of millions of dollars in "campaign contributions." The good news for the American people is that while the new laws have made the proceedures needlessly complex to the point where inexperienced people can't help but trip over the maze of new rules and regulations, the process is still doable, especially with a lawyer who is well trained and experienced in this specialty.

Past/Present Clients
I have probably handled something on the order of about 15,000 bankruptcy cases thropughout my career.

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