How long is the waiting period to get a reverse mortgage if I had a Chapter 11 bankruptcy?

Short answer: there's no set waiting period for a reverse mortgage after a Chapter 11 bankruptcy. What matters is how the bankruptcy is handled, not how long it's been.

Chapter 11 comes up less often than Chapter 7 or Chapter 13. It's more often used by business owners or people with larger, more complicated debts. But the rules for a reverse mortgage work in a similar way.

What you'll need for a HECM

For a HECM on the home you live in, lenders will usually look for these:

• Any liens on your home paid off. Your existing mortgage and other liens are usually paid off from the reverse mortgage at closing.
• Any federal debts resolved. Delinquent federal debt, like unpaid federal taxes or a defaulted federal student loan, has to be taken care of before a HECM.
• A court order from the bankruptcy judge. The order, signed by the judge, says you don't need to pay off the bankruptcy first and that you're authorized to go ahead with the reverse mortgage.

That court order is the piece people most often don't expect. Your bankruptcy attorney will usually handle the request. Build the time for it into your plans, because courts don't move on a lender's schedule.

How the bankruptcy affects your financial assessment

Even without a waiting period, the lender still reviews your credit and how you've paid property taxes, insurance, and other bills. That review is the financial assessment.

If your credit history doesn't meet HUD's standards and the problems weren't caused by circumstances beyond your control, the lender must require at least a fully funded Life Expectancy Set-Aside (LESA). That's money held back from your loan to pay your property taxes and homeowners insurance for you. It lowers what you can use for other things, but it also takes those bills off your plate.

If your bankruptcy plan includes payments you'll keep making, those payments may be counted as an expense when the lender looks at your monthly income.

Here's where we can help. If the bankruptcy came from something outside your control, like a serious illness, a job loss, or a death in the family, document it. We work hard with borrowers to explain credit problems and extenuating circumstances the right way, and most of the people we work with get through the financial assessment without a set-aside.

What about buying a home?

Buying with a HECM for Purchase while you're in a bankruptcy plan can have stricter rules. In a Chapter 13 plan, for example, HUD requires at least 12 months of on-time plan payments and the court's written permission to take on the new mortgage. Ask before you start shopping.

What to have ready when we talk

• Your bankruptcy filing date, and whether the plan has been confirmed or the case discharged or dismissed.
• Your bankruptcy attorney's contact information.
• A list of liens on your home and any federal debts.
• A short note, in your own words, about what led to the bankruptcy.

Please don't send documents through the website. Your loan officer will tell you what's needed and the safe way to share it.

Related questions

• Waiting period after a Chapter 7 bankruptcy
• Waiting period after a Chapter 13 bankruptcy
• Does my home need to be paid off?

Every situation is different, and bankruptcy cases more than most. Call us at 530-888-6000, and your loan officer can go over your case with you before you apply.