FHA Loans With Bankruptcy Dismissal Versus Bankruptcy Discharge

This BLOG On Qualifying For FHA Loans With Bankruptcy Dismissal Versus Bankruptcy Discharge Was PUBLISHED On November 21st, 2020

Bankruptcy Dismissal Versus Bankruptcy Discharge:

There are waiting period differences when qualifying for FHA Loans with Bankruptcy Dismissal Versus Bankruptcy Discharge.

  • There is no waiting period after Bankruptcy Dismissal Versus Bankruptcy Discharge
  • This is only if the consumer has the Chapter 13 Bankruptcy has been dismissed voluntarily by the petitioner and all payments have been on time
  • Needs to be manual underwriting
  • Key is timely payments for the past 12 months
  • All manual underwriting requires 12 months on-time payments
  • With qualifying for FHA Loans During and After Chapter 13 Bankruptcy, mortgage underwriters may go back to 24 months of timely payment history
  • Gustan Cho Associates Mortgage Group has no overlays on FHA Loans During and After Chapter 13 Bankruptcy discharged date

In this article, we will discuss and cover FHA Loans With Bankruptcy Dismissal Versus Bankruptcy Discharge.

Bankruptcy Discharge Versus DismissalBankruptcy Dismissal Versus Bankruptcy Discharge

Here are HUD Guidelines on FHA Loans After Bankruptcy Dismissal Versus Bankruptcy discharge:

If borrowers are 1 year out of Dismissal of a Chapter 13 Bankruptcy then the following applies:

  • Cannot have more than 2X30 late on any debt
  • This includes the 1X30 on Chapter 13 Bankruptcy that caused the dismissal
  • Borrowers who have more than this then will need to wait until they are 2X30 last 24 months

In this article, we will discuss and cover FHA Loans With Bankruptcy Dismissal Versus Bankruptcy Discharge.

Receiving Motion To Dismiss Chapter 13 Repayment Plans

Often a motion to dismiss is filed by the Chapter 13 Bankruptcy Trustee:

  • Such motions to dismiss are normally due to people not making their scheduled monthly payments and/or delay in confirmation of the repayment plan
  • There are other causes a motion to dismiss is filed
  • Many think there are many red tapes but it is not so because these motions are easy to correct and update
  • In the event, if petitioners get notice of motion to dismiss due to not making scheduled payments, they should make the delinquent payments to correct the default and be in good standings
  • In the event, if the motion was filed prior to the confirmation of the plan, it is of utmost importance to get current
  • If the motion is filed after it has been confirmed, try to get current
  • Make sure to always consult with Bankruptcy attorney before doing anything
  • The attorney may be able to do a modification to the plan to avoid the default
  • In the event the motion for dismissal is being filed for the delay, it is the trustee’s method of advising what the issued need to be resolve prior to the trustee and do a recommendation confirmation of the repayment plan
  • These types of motions are not unusual and often common so no need to stress over it
  • There are often times where Chapter 13 Trustee require documentations by the attorney and not the petitioners

Other types of motions include motions to dismiss for a term of payment plan or feasibility issues.

Motion To Dismiss

If a motion to dismiss is issued for the term of the plan this means that at the amount of current payment is because the plan cannot complete within sixty months:

  • To resolve this issue is by filing an amendment to restructure the plan in increasing the payment so it can be completed in 60 months
  • Cases like this are often common after creditors contest after the bankruptcy repayment plan case has received confirmation
  • Motion to dismiss for feasibility refers to the fact that the current budget plan is not sufficient to sustain enough income in making the repayment plan
  • This normally happens when petitioners have their home loans behind in payments where the mortgage is substantially higher than initially states
  • Options of resolving this include decreasing month expenses
  • This way they can afford a higher payment plan
  • Petitioners can also do an objection to the large claim to make the plan unfeasible
  • This happens with Internal Revenue Service proof of claims when petitioners do not have income tax returns and estimating what the consumer owes

Refiling income tax returns for the particular tax year in question and then objecting the proof of claim does the trick.

Are There Refunds On Payments Made To Trustee If Chapter 13 Is Dismissed?

How to submit an application for dismissal

Chapter 13 Bankruptcy Trustees are private attorneys assigned to act as Trustees by the U.S. Bankruptcy Court System.

  • Trustees make their money accordingly to the number of funds that have been paid out during the active time the payment plan has been in effect
  • If creditors such as auto finance companies gotten paid to protect the debtor during the period of confirmation of payment plan received confirmation prior to Chapter 13 Bankruptcy dismissal there will be no refunds

This is due to creditors receiving payments according to the Chapter 13 Bankruptcy repayment terms.

Reaffirming Mortgage After Filing Bankruptcy

Homeowners can file Bankruptcy and if they can afford their mortgage and keep their homes can reaffirm their mortgage. Reaffirming the mortgage is between homeowners and lenders after the homeowner files bankruptcy. Generally, this is very common in cases where consumers file Chapter 7 Bankruptcy. Reaffirming mortgage allows homeowners to keep their homes. Petitioners of bankruptcy can also reaffirm other assets such as a car. How the reaffirming process works is the mortgage company will receive notice of the homeowner’s bankruptcy.

The lender will prepare the agreement by stating the following:

  • home loan balance
  • maturity date
  • monthly payments
  • interest rate
  • other terms of the loan

The reaffirmation written agreement will be sent to the attorney of the homeowner.

  • The attorney will complete the agreement with information pertaining to borrowers income and monthly expenses as stated in Chapter 13 Bankruptcy Payment Schedules to creditors
  • After the agreement is completed by a bankruptcy attorney, the borrower needs to sign it and is forwarded to the mortgage company
  • If the budget of the consumer does not short sufficient income for debt repayment, it gets forwarded to a court date for the petitioner to plead their case before a judge on how they plan on keeping the home and can afford to pay the mortgage
  • If homeowner reaffirms the mortgage, it is expected they keep their monthly housing payments
  • If the petitioner does not plan on reaffirming the mortgage, the property will go into foreclosure and the homeowner no longer has any liability
  • There are cases where homeowners do not reaffirm their mortgage after the bankruptcy and keep on making the mortgage payments

Cases like these, lenders delay the foreclosure process as long as homeowners are making monthly scheduled payments.

Refiling After Bankruptcy Dismissal Versus Bankruptcy Discharge

Excessive and multiple bankruptcies are not viewed as favorably by mortgage lenders.

  • However, consumers can file multiple bankruptcies
  • Consumers who had two Chapter 13 Bankruptcies pending within the past 12 months, the automatic stay expires 30 days after the bankruptcy filing
  • Petitioners and/or their bankruptcy attorneys need to do a motion filing in extending the automatic stay
  • They need an explanation of the U.S. Bankruptcy Courts as of the reason why they feel confident the current filed case will work while the previous cases failed
  • Petitioners with multiple cases pending within the past 12 months, there will not be an automatic stay when the case is filed
  • Petitioners need to file for an automatic stay motion
  • Need to convince the courts why this newly filed case will work and is different than the previous others
  • Most judges will give petitioners the benefit of the doubt in granting a new case as long as there is a valid explanation
  • Bankruptcy petitioners are allowed to redeem some exempt property of value such as a car for the market value of the subject asset
  • This is regardless of the balance owed on such assets
  • This is very common with vehicles
  • If a vehicle is worth $5,000 but the amount owed is $15,000, petitioners can redeem it for $5,000

They can have a relative, friend, or family member gift them the $5,000 for the redemption of the vehicle.

Filing Chapter 13 Bankruptcy To Catch Up On Property Taxes For Homeowners

What is the difference between topping up after being released from bankruptcy and being released from bankruptcy

Homeowners who are behind on their delinquent property taxes.

  • Delinquent real estate property taxes can be included in Chapter 13 Bankruptcy repayment plan
  • The delinquent property taxes are then distributed for payment over a period of time as long as the tax deed was not issued

For example, if a third party tax deed buyer purchased the delinquent property taxes but the tax deed was not issued due to the redemption date not expiring, then the petitioner can cure the delinquent property taxes.

Refiling After A Prior Bankruptcy Dismissal Versus Bankruptcy Discharge

There is only one Chapter 7 Bankruptcy discharge allowed once every 8 years.

  • There is no limit with Chapter 13 Bankruptcy
  • Consumers can file a Chapter 13 Bankruptcy and/or Chapter 7 Bankruptcy right after a Chapter 13 Bankruptcy discharge
  • When it comes to qualifying for FHA Loans, the waiting period only applies to the latest bankruptcy

This BLOG On FHA Loans With Prior Bankruptcy Dismissal Versus Bankruptcy Discharge was written by Gustan Cho of GCA Mortgage News and UPDATED On November 19th, 2020

Qualifying For FHA Loans With Bankruptcy Dismissal Versus Bankruptcy Discharge With Direct Lender With No Overlays

There are many instances where home buyers get turned down from qualifying for FHA Loans right after Chapter 13 Bankruptcy discharged date. Most lenders require a two-year waiting period to qualify for FHA Loans after Chapter 13 Bankruptcy discharged date even though HUD Guidelines have no waiting period requirements. Gustan Cho Associates Mortgage Group has no overlays on government and conventional loans. GCA has no waiting period requirements after Chapter 7 Bankruptcy discharged date. Borrowers can qualify for FHA Loans one year into a Chapter 13 Repayment Plan with Gustan Cho Associates Mortgage Group. To start the qualification and pre-approval process, please contact us at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at GCA Mortgage Group are available 7 days a week, evenings, weekends, and holidays.

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