In this blog, we will cover and discuss the difference when qualifying for a mortgage after bankruptcy dismissal versus discharge mortgage guidelines. There are waiting period differences when qualifying for FHA loans after bankruptcy dismissal versus bankruptcy discharge. There is no waiting period after FHA loans 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. The Key is timely payments for the past 12 months.
Manual Underwriting Guidelines During Chapter 13 Bankruptcy
There are waiting period requirements after bankruptcy. There are differences in waiting period requirements between bankruptcy dismissal versus discharge. The only loan program that allows borrowers to qualify for a mortgage during and/or after Chapter 13 Bankruptcy are FHA and VA loans. FHA and VA loans are the only mortgage programs that allow manual underwriting. FHA loans have the most lenient guidelines when it comes to qualifying for a mortgage with bankruptcy dismissal and/or discharge. Every loan program has its own waiting period requirements after bankruptcy dismissal and/or discharge. Since FHA loans have the most lenient guidelines, we will use FHA loans to illustrate mortgage eligibility requirement comparison on bankruptcy dismissal versus discharge.
Manual Underwriting Guidelines After Chapter 13 Bankruptcy Dismissal
The only two mortgage programs that allow manual underwriting are FHA and VA loans. FHA and VA loans are the only mortgage program that has no waiting period requirements after the Chapter 13 Bankruptcy discharged date. If the Chapter 13 Bankruptcy has not been seasoned two years from the discharge date, the file needs to be a manual underwriting. All manual underwriting requires 12 months of on-time payments prior to loan application submission. When 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 has no overlays on FHA loans during and after the Chapter 13 Bankruptcy discharge date.
FHA Guidelines on Bankruptcy Discharge Versus Dismissal
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
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, that 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.
Mortgage After Chapter 13 Dismissal
There is no waiting period after Chapter 13 Bankruptcy dismissal if it was dismissed voluntarily and the petitioner had timely payments up to the date of dismissal. Make sure to always consult with a 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 requires documentation by the attorney and not the petitioners. Other types of motions include motions to dismiss for a term of payment plan or feasibility issues.
Difference on Motion To Dismiss Bankruptcy Dismissal Versus Bankruptcy Discharge
If a motion to dismiss is issued or there was a change on 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 by 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
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 stated. Options for resolving this include decreasing monthly 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 to the proof of claim does the trick.
Are There Refunds On Payments Made To Trustee If Chapter 13 Is Dismissed?
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 to Keep Home
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 a 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
How Does The Reaffirmation Written Agreement Get Processed To Exclude Home From Bankruptcy
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 it to the mortgage company.
The Ability To Pay Your Mortgage
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 the homeowner reaffirms the mortgage, it is expected they keep their monthly housing payments.
What Happens If You Do Not Reaffirm Your Mortgage
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. For 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 from the U.S. Bankruptcy Courts as to the reason why they feel confident the current filed case will work while the previous cases failed.
Petitioners Filing Multiple Bankruptcies: Multiple Dismissals and Refiling
For 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.
How Do Mortgage Lenders View Bankruptcy Dismissal Versus Bankruptcy Discharge
Mortgage lenders do not consider bankruptcy dismissal versus bankruptcy discharge better than one another. For lenders, bankruptcy is a bankruptcy. The only difference between bankruptcy dismissal versus bankruptcy discharge is the waiting period required after bankruptcy outcome to qualify for a mortgage.
What Happens If I Withdraw My Chapter 13?
Exempt Assets When Filing Bankruptcy
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
Homeowners who are behind on their delinquent property taxes. Delinquent real estate property taxes can be included in the 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 to 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
Bankruptcy Dismissal Versus Discharge Mortgage Guidelines
If the borrower had a recent Chapter 13 Bankruptcy discharge, there is no waiting period requirement if the bankruptcy was dismissed voluntarily. There are many instances where home buyers get turned down from qualifying for FHA loans right after the Chapter 13 Bankruptcy discharged date. Most lenders require a two-year waiting period to qualify for FHA loans after the Chapter 13 Bankruptcy discharge date even though HUD Guidelines have no waiting period requirements. Gustan Cho Associates Mortgage has no overlays on government and conventional loans.
FHA Waiting Period After Chapter 13 Bankruptcy
Gustan Cho Associates has no waiting period requirements after the Chapter 13 Bankruptcy discharged date. Borrowers can qualify for FHA Loans one year into a Chapter 13 Repayment Plan with Gustan Cho Associates Mortgage. To start the qualification and pre-approval process, please contact us at 800-900-8569 or text us for a faster response. Or email us at email@example.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.
July 15, 2022 - 8 min read