home equity loan after bankruptcy?

May 1, 2024 11:44 AM

My husband and I had a chapter 7 bankruptcy in 2020 (discharged over three, but less than four years ago). We own our home outright, and I'd like to get a home equity loan or line of credit. I know banks differ on their exact policies about this kind of thing, but I'm wondering if anyone is aware of lending institutions with shorter timelines or more lenient policies...the bankruptcy was a direct result of Covid lockdown closing our business, so if there's any exception for extenuating circumstances, I think we would have a good chance.
posted by lgyre to Work & Money (5 answers total)

I don't know that there is a hard-and-fast rule about that sort of thing, but I would strongly suggest you start by looking into a credit union in your area, as opposed to a big regional or national bank. CU's are more locally focused, by definition, and are more likely to work with extenuating circumstances than a big bank, or even a smallish regional bank.

Most CU's have fairly easy-to-meet membership criteria that generally involves either a field of employment or a location of residence, so it should be easy to find one you're able to join where you are (and some have no criteria at all, just a share-buying requirement). Once you find one, you'll generally have to buy and maintain ownership of one share in the CU (at mine, that's in the form of a separate savings account containing a whopping $10) as a condition of having a relationship with them, but that's about it as far as eligibility rules go.
posted by pdb at 8:51 PM on May 1 [1 favorite]

Quick comment to support pdb's answer above, and to also steer clear of regional Banks (in general that part of the industry has been taking a bath lately, so I doubt you'd get a good reception... though I am not 100% certain).
posted by forthright at 10:38 PM on May 1

I had a good experience regarding a HELOC with a CU affiliated with a university I went to. Not on this specific issue, but personalized attention. PenFed is another CU (a large one) that I have had good experiences with re home loans.
posted by Mid at 5:09 AM on May 2

Also agreeing with the CU suggestion. You can always go into a local CU and ask to speak to a loan officer, and explain what you want to do. They should be able to tell you if this can be done through them, and they may also know other options.
posted by azpenguin at 7:55 AM on May 2

My impression was that after a bankruptcy it was easier to get credit, because lenders would know that they had at least a few years in which the borrower couldn't file. Perhaps you're still in that window?

My local CU is pretty good sized (several branches) and they don't have a loan officer. Just a mortgage broker, and not underwritten by the CU. So you might have to call around to find one that does offer the type of loan you want.
posted by wnissen at 4:34 PM on May 2