Bankruptcy Impact on Mortgage Payments

Bankruptcy and Mortgage Rates

• A couple with a past bankruptcy pays a 12% fixed rate for a 30-year mortgage, while a better credit rating could secure an 8% rate.
• A $140,000 loan at 12% results in an additional monthly payment of $412.79 due to bankruptcy.

Interest Rate Comparisons

• A person with a bankruptcy incurs a 6% higher mortgage rate, paying 11% on a $150,000 loan.
• By saving the difference in payments for 10 years, invested at 2.5% simple interest, they accumulate $37,395.18.

Impact of Credit History on Interest

• Tyrell, facing higher loan interest due to bankruptcy, realizes he pays an extra $1,000 in yearly interest.
• This additional interest, at 2.5% for a year, could earn $300 in simple interest.

Bankruptcy Filing and Income Considerations

• A Missouri couple with an annual income of $96,730 can file for Chapter 13 bankruptcy to discharge some of their debt after a $2,100 monthly income loss.

Misconceptions about Bankruptcy

• Bankruptcy does not erase all debts; it may allow for credit rebuilding and provide exemptions for essential assets.
• It halts aggressive creditor actions while some obligations remain.

Total Interest Payments Differences

• An individual with bankruptcy pays a 5% higher rate on a 25-year loan compared to someone without it.
• This results in an extra $168,654.22 in total interest on a $160,000 home loan.

Chapter 7 Bankruptcy Eligibility

• A family with a monthly income of $4,650 can file for Chapter 7 bankruptcy in Virginia or Texas, depending on state-specific income limits.

Savings from Avoided Extra Charges

• Byron averages $79.15 monthly in additional bankruptcy-related charges; saved for one year and invested at 2% simple interest, he would end up with $968.80.

Understanding Chapter 13 Bankruptcy

• Chapter 13 bankruptcy is characterized by debt reorganization, enabling individuals to keep their property while managing repayment.

Financial Impact of Bankruptcy on Loans

• Zoe's bankruptcy results in higher loan payments—$819.20 instead of $440.82.
• Due to this, she will pay an additional $18,162.24 in interest over the loan's four-year term.