Fannie and Freddie

Agency Plus

Portfolio Access - Jumbo

FHA

VA

USDA

What Is Bankruptcy?

Bankruptcy (BK) is defined as the client’s application for


court ordered release or restructuring of debt.

Chapter 7

Must be discharged or dismissed greater than 4 years from credit report date.











Must be discharged or dismissed greater than 7 years from credit report date.











Must be discharged or dismissed 2 years prior to application.


  • Once a case number is assigned (new or transferred), seasoning is measured from the case number assignment date.


Refer/Eligible: See the FHA Refer/Eligible topic for additional requirements.

Must be discharged or dismissed 2 years prior to application


Refer/Eligible: See the VA Refer/Eligible topic for additional requirements.







Must be discharged or dismissed 3 years prior to application.












Chapter 12

Prior to the credit report date, one of the following must have occurred:


  • Discharged greater than 2 years AND filed greater than 4 years from credit report date.


  • Dismissed greater than 4 years







Must be discharged or dismissed greater than 4 years from credit report date.
















Must be discharged or dismissed greater than 7 years from credit report date.












Must be discharged or dismissed prior to application.


  • Once a case number is assigned (new or transferred), seasoning is measured from the case number assignment date.


Refer/Eligible: See the FHA Refer/Eligible topic for additional requirements.



Must be discharged or dismissed prior to application


Refer/Eligible: See the VA Refer/Eligible topic for additional requirements.








Must be discharged or dismissed greater than 1 year prior to application.


Refer/Eligible: See the USDA Refer/Eligible topic for additional requirements.









Chapter 13

Prior to the credit report date, one of the following must have occurred:


  • Discharged greater than 2 years AND filed greater than 4 years from credit report date.


  • Dismissed greater than 4 years







Must be discharged or dismissed greater than 4 years from credit report date.












Must be discharged or dismissed greater than 7 years from credit report date.












Must be discharged or dismissed prior to application.


Once a case number is assigned (new or transferred), seasoning is measured from the case number assignment date.


Refer/Eligible: See the FHA Refer/Eligible topic for additional requirements.

Must be discharged or dismissed prior to application


Refer/Eligible: See the VA Refer/Eligible topic for additional requirements.








Must be discharged or dismissed greater than 1 year prior to application.


Refer/Eligible: See the USDA Refer/Eligible topic for additional requirements.







Self Employed Clients with Chapter 11

Must be discharged or dismissed greater than 4 years from credit report date.

Must be discharged or dismissed greater than 4 years from credit report date.

Must be discharged or dismissed greater than 7 years from credit report date.

Must be discharged or dismissed greater than 2 years prior to application date.

Liens on Properties Included in Bankruptcy

When Bankruptcy Documents are Required

Bankruptcy documents are required when ANY of the following apply:


  • Bankruptcy is not reporting on the credit report


  • There is inaccurate information, including but not limited to:


* Discharge dates

* Incorrect chapter number

* Liens included/not included

* Non-mortgage debts included



  • A subordinate lien has been stripped and is now unsecured.


In addition, bankruptcy documents are required if we are unable to verify any information associated with the bankruptcy.

Credit Report

May contain the date of the discharge or dismissal and the docket number.


If there is any required information that is not on the credit report or there is a discrepancy relating to liabilities included in the bankruptcy, the following docs must be obtained:


  • Copies of bankruptcy petition


  • Schedule of Debts


  • Schedule of Debts Discharged


  • Schedule of Debtors and Discharge Certificate and/or evidence to show that all debts not satisfied by the bankruptcy have been paid or are being paid.


If the bankruptcy papers show that a non-mortgage debt was paid/discharged, the debt can be excluded.

Bankruptcy Not Reporting on Credit

If the bankruptcy does no show up on the credit report in the Public Records Items and the client marked Yes for bankruptcies on the declarations, do ALL of the following:


  • Check the Credit History on the credit report to verify which mortgages were included.


  • If there are no indications of a bankruptcy in the credit history, check if the client incorrectly marked Yes.


* If done correctly, bankruptcy guidelines will need to be applied manually.

* If done incorrectly, obtain an LOX from the client.

Multiple Clients, Individual Bankruptcy

If the primary client has an individual bankruptcy and the co-client has a separate individual bankruptcy, this is not considered multiple bankruptcies.


Individual bankruptcies must be treated and qualified separately.

Multiple Bankruptcies

If there is more than 1 bankruptcy filed in the last 7 years, the most recent bankruptcy must be:


  • Discharged or dismissed greater than 5 years prior to the credit report date.


If a bankruptcy was dismissed and then converted into another type of bankruptcy, this doesn't count as multiple bankruptcies.



  • If a bankruptcy was dismissed and then refiled, this does not count as multiple bankruptcies.

Follow standard guidelines above.

Manual Downgrade

Not Applicable

If Bankruptcy does not report on the credit report, the loan may be required to be manually downgraded.


See the FHA Manual Downgrades topic for examples








If Bankruptcy does not report on the credit report, the loan may be required to be manually downgraded.


  • If the Bankruptcy discharge date is greater than 7 years from the date credit was pulled, the loan will not be required to be manually downgraded.


See the Manual Downgrade topic for additional guidance.

No Manual Downgrade Requirements

Client on Title & Not Mortgage

If a client is only on the title to the home, and not the mortgage, bankruptcy guidelines do not apply.

Non-Borrowing Spouse

If a Non-Borrowing Spouse has gone through a bankruptcy, bankruptcy guidelines do not apply.