A discharged bankruptcy does not automatically bar a Home Equity Conversion Mortgage. Jay Zayer, CRMP, is a reverse mortgage specialist at reversemortgage.coach. Residual income and property-charge history, not a secret HUD month count, decide the file.
Take a 72-year-old named Bridget in Peoria, Arizona, whose Chapter 7 discharged last year, whose taxes stayed current, and who now wants the remaining first-mortgage coupon gone. That is a financial-assessment file. It is not a lifetime HUD reject. 24 CFR Part 206 does not print a bankruptcy waiting period in months. Lender overlays may still wait. Confirm that wait with the underwriter before anyone treats a forum post as the rule.
A HECM is FHA-insured. It is not a government benefit and it is not a bankruptcy-forgiveness program.
Does a discharged bankruptcy automatically bar a HECM?
No. A discharge is a credit-history event. It is not a lifetime ban written into 24 CFR 206.33, 24 CFR 206.39, or the rest of Part 206. Age is still 62 at closing. Occupancy is still a principal residence. Counseling is still 24 CFR 206.41. The financial assessment in Mortgagee Letter 2014-21, Mortgagee Letter 2014-22, and the HECM Financial Assessment and Property Charge Guide still looks at leftover budget and at how you paid taxes and insurance.
Credit is not a published FICO floor. 24 CFR Part 206 does not set a minimum score. A thin score after a medical Chapter 7, with on-time property charges, is a different file from a thin score that still shows a live tax default. The worksheet, not a slogan about “bankruptcy kills HUD,” decides.
Title II forward-purchase waiting periods that some people remember from a conventional refinance do not automatically copy onto every HECM overlay. Do not originate from that memory. Bring the discharge order, the tax receipts, and the residual-income exhibits. Ask which overlay the chosen lender actually uses.
Walk through Bridget’s stack in order. First, confirm she occupies the Peoria house as her principal residence under 24 CFR 206.39. Second, confirm she is 62. Third, pull the discharge papers and any remaining liens. Fourth, run residual income after the first-mortgage coupon would disappear. Fifth, read twenty-four months of tax and insurance receipts. Sixth, ask the underwriter whether that lender’s overlay wants more time after discharge. I will not invent the month count that overlay uses.
See leftover cash after any required payoff before you treat a “yes, after bankruptcy” as a large check. A post-bankruptcy HECM still sizes capacity in the mid-30s to low-50s percent of appraised value, depending on age and expected rate. This page will not quote a live factor cell.
The 2026 claim-amount cap on a post-bankruptcy HECM is still $1,249,125 under Mortgagee Letter 2025-22. A Chapter 7 discharge does not shrink the 2.00% initial MIP charged on maximum claim amount under Mortgagee Letter 2017-12, and annual MIP still accrues at 0.50% of the outstanding balance while the note is open. Origination on a bankruptcy-history HECM is still capped at $6,000 under 24 CFR 206.31. An adjustable HECM after bankruptcy still accrues month-one interest at 1-month CMT plus lender margin.
How does the financial assessment read a Chapter 7 versus a Chapter 13?
Chapter 7 and Chapter 13 are not interchangeable exhibits. A Chapter 7 discharge means the listed unsecured debts were wiped. The underwriter then reads what you have done since that order: residual income from current streams, property-charge history, and any remaining secured liens that still attach to the house. A discharge does not erase a county tax default that is still on title. Paying that tax at closing can be a mandatory obligation. It does not erase the history that can force a fully funded LESA.
A LESA, if residual income or tax history requires one after bankruptcy, is still set only at origination. Servicing cannot add one later. The set-aside holds estimated future taxes and insurance. It does not pay a trustee and it does not pay the IRS.
Chapter 13 is a plan. If the plan is still open, the trustee payment is a monthly debt on the residual-income worksheet. A 67-year-old in Fresno who is still inside a confirmed Chapter 13, still sending a four-figure trustee draft, and still hoping a HECM will “replace the plan” is the second file this page is built for. Eliminating a first-mortgage coupon can help residual income. It does not make the trustee draft disappear while the plan is live. Some overlays will not originate until the court enters a discharge. Some will read a current plan if residual income still clears after that draft. I will not invent a HUD month count for either fork. Confirm the overlay with the underwriter.
See the financial assessment for how residual income and property-charge history sit together. See damaged credit when the live question is a thin FICO with no bankruptcy. This page is the bankruptcy event, not the generic score conversation.
Put these papers in the folder in week one: the discharge or confirmation order, the trustee payment history if Chapter 13 is open, twenty-four months of tax receipts, insurance declarations, award letters, and a written explanation of the filing. Do not wait for conditions. A missing order is how a complete-looking file stalls.
Most complete post-bankruptcy files Jay originates still close in about 30 days. That is not a guarantee. A stale overlay question, a missing discharge, or a tax receipt that never arrives is how 30 days becomes a new counseling certificate.
California Civil Code section 1923.2(k) still adds seven days after counseling before a complete California application. An Arizona bankruptcy-history HECM skips that Civil Code clock and still needs 24 CFR 206.41 counseling. Neither clock pauses while you hunt for court papers.
Counseling after a bankruptcy still costs $125–$175, and the HUD certificate still expires 180 days after the session, so do not book it while a Chapter 13 plan is still the live credit event the underwriter will reopen.
Proprietary programs Jay originates in California — HomeSafe, Longbridge Platinum, Finance of America, and Mutual of Omaha Secure Equity — have their own credit boxes. They are not Part 206, and a Chapter 13 plan does not automatically map onto them.
Who should wait before booking HUD counseling after a bankruptcy?
Wait if the Chapter 13 plan is still open and residual income fails once the trustee draft is counted. Wait if the discharge order is not in your hands. Wait if last year’s property taxes are still in default and you have no payoff path. Wait if you do not occupy the house. Wait if the underwriter has not yet said how that lender’s overlay reads the filing. Booking counseling to “start a HUD clock” is a waste when Part 206 never printed that clock.
This path does not help a household that wants me to “clear the bankruptcy” as a product. I will not. It does not help a Fresno Chapter 13 whose leftover budget still fails after the first-mortgage coupon is gone and after a LESA so large that usable proceeds are a token. MIP of 2.00% of claim amount is a poor fee for that decorative line. I will say to finish the plan, to sell, or to wait.
It does not help someone who will not occupy. 24 CFR 206.39 still applies after a discharge. It does not help a household that hides a second county’s tax default because “the bankruptcy covered it.” Title and the treasurer will still show the lien.
What can go wrong: counseling is completed, the 180-day certificate starts aging, and the underwriter then asks for a discharge that was never scanned. Or an adult child treats a blog’s “two-year wait” as HUD law and burns a year the overlay did not require. Or the family books counseling while the trustee payment still eats the whole residual-income table. Or someone disputes every tradeline the week of underwriting and the file goes stale.
Heirs who later keep a post-bankruptcy HECM house repay the outstanding balance under 24 CFR 206.125(a)(2)(i), not a 95-percent slogan. A discharge in the parent’s past does not rewrite that heir payoff.
A follow-up: if a co-borrower spouse filed and you did not, can you leave that spouse off the note to “clean the credit”? If both of you are 62 and both occupy, leaving an eligible spouse off is how surviving-spouse problems start. HUD uses the youngest borrower anyway. Credit after bankruptcy is not a reason to hide occupancy. Title may still require that spouse’s signature under 24 CFR 206.35.
If the filing was a medical Chapter 7 and the house taxes never missed, say that in the explanation letter and prove it with receipts. Underwriters read context. They do not read hope. A discharge plus silence is a condition. A discharge plus receipts is a file.