Bankruptcy

If you have experienced bankruptcy, you may believe obtaining a mortgage is impossible. However, it is essential to note that bankruptcy does not necessarily mean the end of your dreams of homeownership. The specialist mortgage brokers we work with have access to lenders that offer mortgages to customers with a current or historic bankruptcy. . These brokers have a proven track record of assisting people who have been bankrupt to secure a mortgage.

What Is Bankruptcy?

Bankruptcy occurs when an individual gets to a point where they can no longer pay the majority of their creditors and commitments and there is no realistic chance of these debts being repaid or the commitments being met on a regular basis. Quite often people will have tried a number of alternative solutions by the time they are considering filing for bankruptcy and they see no other option than having their unsecured debt struck off legally. Bankruptcy is a means of last resort and there are consequences to being made insolvent that we will go into further down this article.

What are the alternatives to Bankruptcy?

You could negotiate directly with your creditors to make individual monthly payments, or you could speak with a Debt Management Company to negotiate payments to a group of creditors on your behalf but the issue with these solutions is that they are not legally binding meaning that any creditor could still decide to take action against an individual and call in their debt. It could drag the situation out for longer than is necessary. Another solution could be to enter into an IVA (Individual Voluntary Arrangement) but this is a legally binding contract and you must have the means to be able to make regular payments into the IVA so that the creditors are repaid within a pre-determined time frame. This involves a full income & expenditure assessment which often fails as the individual concerned cannot make payments to their creditors in the first place.

How will this look on my credit report?

Not good, is the answer I am afraid. By the time a bankruptcy occurs there are usually multiple defaults on a credit file that will not disappear for six years from date of registration. The bankruptcy order itself will show on a report for a minimum of six years alongside the defaults and or CCJ’s if any have been registered. Usually, bankruptcies are ‘discharged’ 12 months from the date of the court order and this will also show on your credit report. Lenders will not consider an application until an individual has been discharged from their bankruptcy.

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Can I get a mortgage with a Bankruptcy?

Yes, is the simple answer but it will make the process more difficult. When a lender assesses a mortgage application post-bankruptcy, several key factors will come into play. The age of your bankruptcy, how you have conducted your finances since the bankruptcy and how much deposit/equity you have available to put down on the property will be the main three things that a lender will be looking at. Using a broker who has the knowledge and experience of dealing with credit issues such as bankruptcy and then knowing which lenders to approach is the key to this.

How old does my Bankruptcy need to be?

The longer ago a bankruptcy was registered, the better it will look.

A few lenders will consider an application as long as the bankruptcy is over two years old (one year discharged). More lenders open up if it was registered three or four years ago and more lenders again the closer the bankruptcy is to dropping off your credit report altogether.

What size deposit will I need with Bankruptcy?

It could be as low as 10%. It could be as high as 50%.

The devil is in the detail. The amount of deposit needed will mainly depend upon the age of your bankruptcy, how long ago you were discharged, and whether there are any other credit issues or general mortgage criteria issues that the lender faces when considering an application. If there was a property repossession as part of the bankruptcy then this will lessen the number of lenders that can be approached.

Will I need a Mortgage broker if I have a Bankruptcy?

In nearly all cases the answer is yes. Approaching a high street bank will almost certainly result in your mortgage being rejected. It is the job of a specialist broker to understand how your bankruptcy will affect a mortgage application, when an application may be considered, what level of deposit may be required from you and then to submit the correct paperwork needed by the lender to assess your case. This will massively increase your chances of being approved for a mortgage. Get in touch and we will organise a broker to contact you, who has knowledge and expertise in bad credit mortgages.

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As a mortgage is secured against your property, it could be repossessed if you do not keep up mortgage repayments.