In bankruptcy, how soon can I refinance?

Original Q: I have been out of chapter 13 bankruptcy for 15 months. I want to refinance and lower my interest rate. Is that possible?

A: Unfortunately, you may have a while yet before you can get that refinance. According to Freddie Mac’s guidelines, the "recovery time period" for reestablishment of credit after a Chapter 13 bankruptcy is 48 months from the dismissal date, but this period is only in effect if the bankruptcy was "caused by financial mismanagement." If the bankruptcy was not due to your actions (i.e. overspending) but rather due to illness, income loss, etc., the period will still be 24 months from the discharge date. Fannie Mae has similar rules in effect of two years from the discharge date or four years from the dismissal date.

You may be eligible for an FHA-backed refinance, though. According to HUD, you will need to document that "one year of the pay-out period under the bankruptcy has elapsed, that your payment performance has been satisfactory and all required payments have been made on time, and you have received written permission from the bankruptcy court to enter into the transaction." If there have been less than two years since your discharge date, the loan will need to be manually underwritten, complicating the process.