Mortgages after Bankruptcy

Can I get a mortgage after Bankruptcy

Immediately after discharge, you will need a minimum 50% deposit. First time buyers are acceptable. Self employed are acceptable

Currently there are very few lenders that will lend to discharged bankrupts.  You may have to wait until your bankruptcy discharge is at least 3 years old

Three years after discharge, you will ideally have a 25% deposit. It may be possible to get a mortgage with a 15% deposit but you will need to build up a good credit score to get accepted

Some months before making a mortgage application, check your credit file held by Experian or Equifax. Check that all the debts that should have been included in the bankruptcy are showing as satisfied or partially satisfied

If they are not showing as satisfied then you should contact the firm concerned and ask them to contact the credit reference agencies and correct the entries.

This may be a time consuming and frustrating exercise for you as firms tend to move very slowly. You may be asked to send in a copy of your bankruptcy discharge certificate.

If you dont do this then some of the entries on your credit file will show as live - unsatisfied entries. The existance of an unsatisfied entry may preclude you from certain schemes or may reduce your credit score to below a lenders threshold


Please phone to discuss your situation. We can provide full illustrations for any scheme discussed
 

Bankruptcy

Bankruptcy is an option for clearing debts that you cannot pay. It is a court order which usually frees you from your debts, although, depending on your circumstances, you may still have to make a contribution towards your debts. Some types of debt cannot be included in a bankruptcy, such as government Student Loans and court fines.

You can voluntarily apply for bankruptcy or your creditors (the people you owe money to) can approach the court themselves and ask for you to be made bankrupt. You will have to pay a fee and fill in several forms.

Becoming bankrupt may mean you have to give up any valuable possessions you own and possibly your home. Your details will also be advertised in a local newspaper and on the internet.

Under bankruptcy law, you will be automatically 'discharged’ after a maximum of 12 months in England and Wales, although the discharge can be extended indefinitely if you fail to co-operate in the bankruptcy proceedings. Scottish bankruptcies are called sequestrations and are usually discharged after three years.

Although bankruptcy will be the best option for some people, it should only ever be considered as a last resort and after receiving professional advice.


 

Will bankruptcy affect my ability to obtain a mortgage

A bankruptcy order will appear on your credit report for a minimum of six years from the date of bankruptcy and longer if the bankruptcy is of a longer duration. During the period of bankruptcy, a number of restrictions apply, for example you are legally bound to tell a lender you are bankrupt if you are applying for credit of more than £500. This means you are unlikely to be able to obtain credit while you are bankrupt.

Even after your bankruptcy has been discharged, organisations might refuse to give you credit or other financial services simply because you have been bankrupt in the past.

Mortgage lenders are likely to charge you a higher interest rate as you will be considered a high risk customer.

We can arrange a mortgage once your bankruptcy has been discharged.
If you would like a mortgage immediately after your bankruptcy has been discharged then you will need a 50% deposit.

After your bankruptcy has been discharged 3 year, you will need a minimum 25% deposit. We may be able to arrange a mortgage with a smaller deposit where you have rebuilt your credit score

Please phone us to discuss your situation.
 

What happens when I am made bankrupt?

 

If your application for bankruptcy is approved in court, your creditors can no longer chase you for payment. The Official Receiver or a licensed insolvency practitioner will take control of your assets (your money and property) and will deal with your creditors for you.

When you are made bankrupt, any money or assets that you have will be shared between your creditors and, if you can afford to, you may be required to make payments to your creditors for three years. Any property you own, whether or not it’s mortgaged, may have to be sold, so you may lose your home.
 

What happens if my bankruptcy is cancelled?

 

If your bankruptcy is cancelled by the court (a process known as ‘annulment’), credit reference agencies will remove information about the bankruptcy from your credit report if you send them a copy of your annulment certificate.
 

How long will bankruptcy affect my ability to obtain credit?

In England and Wales, most bankrupts receive their discharge within one year, but the fact that you were bankrupt will stay on your credit report for at least six years.

Although it will show when your bankruptcy is discharged, the discharge will not wipe your credit report clean. Your report may also separately show details of any debts that were included in your bankruptcy and these will also stay on your credit report for six years.

Ideally all debts that were included in the bankruptcy should show as satisfied or partly satisfied. If they do not show as satisfied then you could contact those creditors and ask them to correct the record with the credit reference agency

You can add a note to your report to explain that all the debts were included in your bankruptcy. However as most lenders use credit scoring in their assessment adding a note will not help very much

Even though the details of your bankruptcy will usually be removed from your credit report after six years (as long as your bankruptcy has been discharged and you have not been reckless – see next section) some mortgage lenders will ask if you have ever been bankrupt, so your bankruptcy could affect your credit worthiness forever. If your bankruptcy is never discharged, it can remain on your credit report indefinitely.
 

I am a discharged Bankrupt - Is there anything I can do to help me get a mortgage

Save a large deposit.

Improve your credit score - Most lenders these days will credit score your situation. You can't do much about the bankruptcy, but you can try to improve your score.

Request your credit file from Experian or Equifax. You can do this on-line.

Look at the credit entries that should have been included in the bankruptcy. Are these showing as satisfied or partially satisfied? If not then you need to contact the creditor and ask them to put it right.

An item that is showing as satisfed will score higher than if not satisfied.

The date of any defaults should not be dated after the date you entered the bankruptcy. If they are dated after then ask the creditor to put this right.

You may need copies of your discharge certificate to acheive this

Are there alternatives to bankruptcy?

 

If you are struggling to meet payments, get in touch with your creditors and tell them about your situation. Many lenders will be sympathetic and you may be able to make an informal arrangement with them to make reduced payments for a while.

If you feel you need help doing this, contact one of the free advice agencies as they may be able to negotiate with your creditors on your behalf and arrange a debt management plan for you.

They will also be able to explain other more formal ways to sort out your debts, including an individual voluntary arrangement (IVA), a Protected Trust Deed (Scotland) and an Administration Order.