36 months from the resolution date of any major credit event.
Not from when the problem started. Not from when the lender filed. From when it resolved — bankruptcy discharge date, foreclosure completion date, short sale close date.
The 36-month standard gives independent contractors who experienced financial difficulty a clear, predictable timeline back to mortgage access.
Had a Credit Event? Your 36-Month Path Starts Now.
Go Deeper
Mbanc NMLS #38232 | Equal Housing Opportunity Lender
Seasoning Requirements: Every Event
| Credit Event | Seasoning | Clock Starts |
|---|---|---|
| Chapter 7 bankruptcy | 36 months | Discharge date |
| Chapter 13 bankruptcy | 36 months | Discharge date |
| Foreclosure | 36 months | Completion date |
| Short sale | 36 months | Close date |
| Deed-in-lieu | 36 months | Transfer date |
| Mortgage charge-off | 36 months | Charge-off date |
| Forbearance/modification | 12 months | End of forbearance |
The 36-month standard is faster than conventional’s 4 years (Chapter 7) and 7 years (foreclosure). For contractors who can’t qualify through FHA (either loan amount limitations or income documentation constraints), the 1099 Non-QM path at 36 months represents the fastest viable return to homeownership.
The Self-Employed Contractor’s Credit Event Recovery Advantage
Independent contractors have a unique advantage in post-credit-event mortgage recovery: the 36-month waiting period and the 24-month income documentation requirement run simultaneously.
A contractor who begins or continues contracting work at Month 1 after the credit event:
Month 1: Start building 1099 income. Open secured credit card.
Month 12: 12 months of contractor income history established. Credit rebuilding ongoing.
Month 24: 24 months of 1099 history established. Credit approaching 640.
Month 36: Full seasoning complete. 24-month 1099 income documentation available. Credit rebuilt.
Month 37: Ready to apply with complete file.
Everything builds simultaneously. The contractor who acts immediately doesn’t wait 36 months and then start preparing — they arrive at Month 36 ready to close.
What Needs to Be Rebuilt During the 36 Months
1. Credit score to 640+
The credit event (bankruptcy, foreclosure) creates a large derogatory mark that drops scores 100–150 points. Rebuilding to 640+ requires:
Month 1: Secured credit card at a credit union or bank. $500–$2,000 deposit. Use monthly for routine purchases. Pay full balance every month.
Month 6–12: Score begins emerging. Target: 600+ by Month 12 with perfect payment history.
Month 18–24: Score reaches 620–640 for disciplined rebuilders.
Month 36: Target 660+ for maximum LTV access.
2. Clean post-event payment history
Maximum 1 late payment (30+ days) in the 12 months preceding application. This is separate from the broader credit rebuilding — it’s about the specific housing payment history (rent, if applicable) and all other accounts during the seasoning period.
3. 1099 income documentation
12 or 24 months of qualifying 1099-NEC from clients, plus 2-year independent contractor history. If you’ve been contracting continuously through and since the credit event, the documentation builds naturally.
4. Down payment and reserves
Standard 15–20% down plus 3–6 months PITIA in verifiable accounts. Accumulated during the productive working period.
Post-Bankruptcy Contractors: The Most Common Success Profile
The most frequently successful post-credit-event 1099 loan borrower:
– Chapter 7 bankruptcy triggered by a business failure or catastrophic medical event, not chronic financial mismanagement
– Continued or resumed contracting work immediately post-discharge
– Built 36 months of contract income (sometimes with the same or similar clients)
– Rebuilt credit disciplinedly from Month 1
– Arrived at Month 36 with clean credit (660+), 24+ months of strong 1099 income, and capital for down payment
The business failure story is common among contractors whose primary client (often their prior employer) ended the relationship. The same expertise that made them a valuable contractor for one firm makes them a viable contractor for others. Income recovery is often faster than the credit recovery timeline.
1099 After Bankruptcy: The Specific Program Advantage
For contractors who experienced bankruptcy, the 1099 loan offers advantages over conventional that go beyond the shorter seasoning:
No tax return required: Self-employed contractors who had a bankruptcy may have complex tax filing histories during the bankruptcy period — multiple amended returns, carry-forward losses, unusual income patterns. The 1099 program bypasses all of this. The qualifying income is based entirely on current 1099 forms from current clients.
Alternative documentation: The contractor whose prior business failed and was discharged in bankruptcy may have depleted retirement accounts, sold assets, or have balance sheet complexity from the discharge. None of this appears in the 1099 income documentation. Current 1099 income from current clients is the entire income story.
Maximum loan access: At 36 months with 640+ credit, the full 1099 loan program is available — up to $4,000,000 maximum loan with no after-bankruptcy loan restriction beyond standard credit requirements.
Real Post-Credit-Event 1099 Loan
Houston energy consultant. Chapter 7 discharged March 2022 (oil market downturn business failure). Returned to independent contracting in April 2022. Built client base through 2022–2024. Opened secured Navy Federal card in March 2022, used consistently.
March 2026 application (37 months post-discharge):
Credit rebuilt to: 672.
24-month 1099-NEC average: $428,000/year.
Qualifying income: $428,000 × 90% ÷ 12 = $32,100/month.
Tax return during bankruptcy period: highly complex — not submitted.
- Down payment accumulated: $225,000 (15% of $1.5M target).
- Reserves: $85,000 (6 months at $14,000 estimated PITIA).
Application: submitted. Underwriting: bankruptcy noted, 37-month seasoning confirmed, credit 672 (above 660 threshold for 85% LTV). 1099 income: clean documentation from current clients. Close: 27 days.
Conventional path: 48 months minimum post-Chapter 7 discharge. Not available until March 2026. The 1099 Non-QM path provided access 11 months earlier.
Frequently Asked Questions
How long after bankruptcy before a 1099 contractor can get a mortgage?
36 months from the Chapter 7 or Chapter 13 discharge date with minimum 640 credit rebuilt.
Is the 1099 seasoning period faster than conventional after bankruptcy?
Yes — conventional requires 4 years after Chapter 7 discharge. Non-QM 1099 requires 36 months. The 1099 path is approximately 12 months faster for Chapter 7.
Do I need to explain the bankruptcy in my mortgage application?
The credit event is documented in the file — the discharge date, the 36-month calculation, and the confirmation that seasoning is complete. An explanation letter describing the cause (business failure, medical event) and the recovery is standard context documentation that strengthens the file.
Not a commitment to lend. Mbanc NMLS #38232 | Equal Housing Opportunity Lender
Rebuilding the Contractor Business After a Credit Event
For contractors whose credit event was triggered by a business failure, the post-discharge period often involves rebuilding the client base while simultaneously rebuilding credit.
The income trajectory that best supports 1099 mortgage qualification:
Year 1 post-discharge: Income may be rebuilding. Starting with 1–2 clients.
Year 2: Income growing. 2–4 clients. Full contractor track record establishing.
Year 3 (application year): Strong current income. 24-month history available. Clean credit. Ready.
If Year 1 income was low and Year 2 was stronger, 24-month averaging captures both years. If Year 2 was dramatically higher than Year 1, 12-month qualification captures peak income.
The contractor who rebuilds income quickly benefits from 1099 mortgage access faster than the W-2 worker who must wait for employer-documented salary history to establish conventional qualification. The 1099 program rewards income recovery as demonstrated through 1099 forms — regardless of what the tax return shows for the same period.
Not a commitment to lend. Mbanc NMLS #38232 | Equal Housing Opportunity Lender | 1099-NEC and 1099-MISC qualify; 1099-R and 1099-INT do not | 90% standard qualifying ratio | No CPA letter required | 2-year independent contractor history required | Minimum 640 credit | Maximum $4,000,000 | Programs and rates subject to change
About Mbanc 1099 Loan Program
Mbanc (Mortgage Bank of California, NMLS #38232) is a consumer-direct Non-QM lender offering 1099 mortgage loans for independent contractors across 24 states for primary residence financing. The 1099 program uses IRS Form 1099-NEC and 1099-MISC as income documentation — replacing the conventional tax return requirement with the federal compensation documentation that clients are legally required to file.
Same-day pre-qualification: 15-minute call. No documents required for initial conversation. Your approximate 1099 income totals and target purchase price are enough to determine qualifying loan amount.
Get pre-qualified: mbanc.com/apply | Mbanc NMLS #38232 | Equal Housing Opportunity Lender
State licenses: FL #MLD1287 | CA DBO #60DBO45280 | TX SML | NC #L-183446 | IL #MB.6761396 | GA #48090 | TN #178934 | (and 17 additional states)
Not a commitment to lend. Programs and rates subject to change. All borrowers subject to credit and underwriting approval.