Can you get a reverse mortgage after filing bankruptcy? Yes, it’s possible. Having a bankruptcy in your past doesn’t automatically mean you can’t qualify for a reverse mortgage.
Whether you filed Chapter 7 or Chapter 13, there may still be options available. However, the type of bankruptcy, when it occurred, whether it has been discharged, and your financial situation today can all affect your eligibility.
One important thing to understand is that reverse mortgages work differently from traditional mortgages. For an FHA-insured Home Equity Conversion Mortgage (HECM), lenders review your credit history, but they also evaluate your ability to maintain property taxes, homeowners insurance, and other ongoing obligations.
Let’s take a closer look at how bankruptcy affects reverse mortgage qualification and what lenders consider during the approval process.
Can You Get a Reverse Mortgage After Chapter 7 Bankruptcy?
Yes, a previous Chapter 7 bankruptcy doesn’t necessarily prevent you from qualifying for a reverse mortgage.
Chapter 7 bankruptcy typically involves the liquidation of certain assets and the discharge of eligible debts.
For homeowners considering a reverse mortgage, the lender will want to know when the bankruptcy was discharged, whether any debts or liens remain, and how you’ve managed your finances since then.
The guidelines can also depend on the type of reverse mortgage you’re applying for.
For example, FHA’s HECM for Purchase program has specific bankruptcy waiting-period requirements. A Chapter 7 discharge generally must be at least two years old, although certain exceptions may be available after at least 12 months when documented extenuating circumstances apply.
For a traditional HECM on a home you already own, the lender evaluates the bankruptcy under applicable FHA financial assessment and credit-history requirements.
Rather than assuming every reverse mortgage has the same waiting period, it’s important to review the specific program and your individual circumstances.
Can You Get a Reverse Mortgage During Chapter 13 Bankruptcy?
Possibly, but an active Chapter 13 bankruptcy can make the process more complicated.
Chapter 13 bankruptcy generally involves a court-approved repayment plan, often lasting three to five years.
If you’re still making payments under that plan, the lender will need to review your bankruptcy status and determine whether the proposed reverse mortgage transaction is permitted.
For an FHA HECM for Purchase, specific guidelines address Chapter 13 bankruptcies. These include situations where the bankruptcy has been discharged or the borrower has completed at least 12 months of satisfactory payments under the repayment plan.
When the bankruptcy is still active, written bankruptcy court permission may be required.
For other reverse mortgage transactions, the lender must review the applicable program requirements, bankruptcy documents, and any necessary court or trustee authorization.
If you’re currently in Chapter 13, don’t assume you have to wait until the entire repayment plan is completed. However, you should have your situation reviewed before making any plans based on reverse mortgage proceeds.
How Long After Bankruptcy Can You Get a Reverse Mortgage?
This is one of the most common questions homeowners ask.
The answer depends on several factors, including:
- Whether you filed Chapter 7 or Chapter 13
- Whether the bankruptcy is active, discharged, or dismissed
- Whether you’re refinancing your current home with a HECM or purchasing another home
- Your credit and property tax payment history
- Your current income and financial obligations
- The lender’s underwriting requirements
For example, the bankruptcy requirements for a HECM for Purchase are not necessarily identical to those for a HECM on your existing residence.
Some proprietary or jumbo reverse mortgage programs also have their own guidelines.
The best approach is to review the actual bankruptcy documents and determine which programs may be available rather than relying on a general waiting-period rule.
Does Bankruptcy Affect Your Reverse Mortgage Financial Assessment?
Yes. Even though FHA-insured HECM reverse mortgages don’t have a specific minimum credit score requirement, lenders are still required to evaluate your financial situation.
This process is called a financial assessment.
The lender may review:
- Your credit history before and after bankruptcy
- The circumstances that led to the bankruptcy
- Your current income and available financial resources
- Existing debts and required monthly payments
- Property tax and homeowners insurance payment history
- Whether any outstanding judgments or liens affect the property
- Your ability to meet ongoing reverse mortgage obligations
For example, someone who filed bankruptcy several years ago because of a temporary financial hardship and has consistently maintained their property expenses since then may present a different situation from someone with an active bankruptcy and continuing financial difficulties.
The lender reviews the complete picture rather than making a decision based solely on the bankruptcy appearing on your credit report.
For more information, visit our Reverse Mortgages With Bad Credit page.
What if Your Bankruptcy Was Caused by Medical Bills or Loss of Income?
Sometimes financial problems are caused by circumstances beyond a homeowner’s control.
Examples might include unexpected medical expenses, the death of a spouse, divorce, or a significant loss of income.
FHA financial assessment guidelines allow lenders to consider certain documented extenuating circumstances when evaluating credit problems.
For example, suppose you filed bankruptcy after experiencing a major medical emergency that resulted in substantial expenses and a temporary loss of income.
If your financial situation has since stabilized, the lender may consider the circumstances surrounding the bankruptcy and your subsequent payment history.
However, an explanation alone isn’t necessarily enough.
The lender may need documentation showing what happened, how it affected your finances, and why the same problem is unlikely to occur again.
Not every hardship qualifies as an acceptable extenuating circumstance, and the final decision remains subject to underwriting.
Can You Get a Reverse Mortgage With Bad Credit After Bankruptcy?
Possibly.
A bankruptcy can significantly affect your credit score, but FHA-insured HECM reverse mortgages don’t have a specific minimum FICO score requirement.
That doesn’t mean your credit history is irrelev