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#6516 - 11/09/01 07:51 PM Loan Denial / Bankruptcy
LoisLane Offline
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LoisLane
Joined: Oct 2001
Posts: 1,570
Wisteria Lane..
A lender said he was told that a loan cannot be denied solely because of a bankrupcy. I know that bankruptcy can't be used as a lone reason to deny employment, but I'm unaware of restrictions for the loan approval/denial process. Does anyone have any information on this subject?
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#6517 - 11/09/01 08:56 PM Re: Loan Denial / Bankruptcy
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Reg B does not state this but it could be state law. For instance, Iowa has a state law that says exactly what your lender said.
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#6518 - 11/11/01 08:56 AM Re: Loan Denial / Bankruptcy
Andy_Z Offline
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Andy_Z
Joined: Oct 2000
Posts: 27,353
On the Net
Generally delinquency and even repossessions accompany a bankruptcy. Those add to the reasons, if the deal looks bad.

Until I wrote a paper on this I had not realized that the right to file bankruptcy is in our US constitution.

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#6519 - 11/12/01 11:30 PM Re: Loan Denial / Bankruptcy
Lucy Griffin Offline

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Lucy Griffin
Joined: Nov 2000
Posts: 1,544
Because bankruptcy gives the debtor certain protections, some (misguided) lawyers have argued that bankruptcy could not be a reason for denial under Regulation B. The FRB has consistently said that this position is wrong. Bankruptcy simply is not a prohibited basis for making a credit decision. It is relevant to the applicant's credit performance. So, unless state law provides special protections for bankrupts, it does not violate either ECOA or the Fair Housing Act to use that as a reason for denial.

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