Can I redo my mortgage if I file for personal bankruptcy? This is a question I get asked on a regular basis, so it’s one that I like to revisit every once in a while.
The answer to this question depends on what is meant by “redo”. Obviously filing personal bankruptcy damages your credit rating. Filing personal bankruptcy results in a R9 (which is the worst) credit rating which as a first-time bankrupt will remain on your credit report for six years after your discharge.
If by “redo” you mean renew your existing mortgage contract with your current mortgage lender, then you should be able to “redo” your mortgage despite filing personal bankruptcy. Since most mortgages renew automatically without a new credit application the R9 credit rating that results from filing personal bankruptcy should not affect your renewal. Your existing mortgage lender isn’t making their decision to renew based on your credit rating at the time of renewal.
However, if by “redo” you mean refinance your existing mortgage contract with a different lender, then filing personal bankruptcy will probably affect your ability to “redo” your mortgage. Since refinancing your current mortgage requires a new credit application the new mortgage lender will see the R9 credit rating that results from filing personal bankruptcy and they will be making their decision based on your credit rating at the time of renewal.
Many people who file personal bankruptcy are home owners and renew their mortgages after filing personal bankruptcy. If you own your home, your mortgage is coming up for renewal and you are planning on filing personal bankruptcy your best bet is to take the automatic renewal offered by your existing mortgage lender.
