This ARTICLE On Chapter 11 Bankruptcy Guidelines On Mortgage Loans Was UPDATED And PUBLISHED On December 5th, 2020
Consumers can qualify for a home loan after bankruptcy.
- We have covered qualifying for a mortgage after Chapter 7 and Chapter 13 Bankruptcy
- However, we have not written any blogs about qualifying for a mortgage after Chapter 11 Bankruptcy
- Chapter 11 Bankruptcy is another option for consumers who may not be eligible for Chapter 7 and/or 13 Bankruptcy
- Chapter 11 Bankruptcy is more common for businesses
- However, individuals can file Chapter 11 Bankruptcy on a personal level
- Gustan Cho Associates is a mortgage company licensed in multiple states with no overlays on government and conventional loans
- We are experts in helping borrowers qualify for a mortgage after bankruptcy
- This includes helping folks qualify for an FHA and/or VA loan during Chapter 11 and Chapter 13 Bankruptcy repayment plan
- Chapter 11 and 13 Bankruptcy does not have to be discharged to qualify for an FHA and/or VA loan
- There is no waiting period requirements to qualify for an FHA and/or VA loan after Chapter 11 and Chapter 13 Bankruptcy discharged date
- Our Non-QM mortgages have no waiting period requirements after bankruptcy to qualify for a home loan
- One of our most popular loan programs are mortgages one day out of foreclosure and bankruptcy
In this article, we will cover and discuss Chapter 11 Bankruptcy Guidelines On Government And Conventional Loans.
Chapter 11 Versus 7 And 13
Most consumers have heard of Chapter 7 and 13 Bankruptcy.
- However, not too many folks know what Chapter 11 is unless they have consulted with a bankruptcy attorney
- In general, Chapter 11 is a type of debt reorganization program for businesses and individuals
- It normally is used for consumers that have large debts
- It is less common than Chapter 7 and 13 bankruptcy and more time-consuming
- For the year ending 2017, there were 486,542 Chapter 7 and 296,599 Chapter 13 filings in the United States
- However, there were only 7,052 Chapter 11 filings
Chapter 11 is more geared towards consumers who have larger assets and need the courts’ help in restructuring their debts.
What Is the Chapter 11 Repayment Plan?
Chapter 11 is often referred to as “reorganization bankruptcy.”
- Businesses who want to keep operating but need time to reorganize their debts use Chapter 11 Bankruptcy to get back to profitability
- Like other forms of bankruptcy, it can be filed voluntarily
- However, a business may be forced into Chapter 11 Bankruptcy if three or more creditors file a petition with the U.S. Bankruptcy Court
- Like other forms of bankruptcy, once a petitioner files bankruptcy, there is an automatic stay of creditors trying to proceed with collection actions against the petitioner
- Petitioners, whether they are a business and/or individual, have four months to come up with a restructuring plan
- If the petitioner needs additional time, the court can grant up to an 18-month extension
- After this period expires, creditors can propose their own restructuring plan to the court
- The restructuring plan is a written agreement on how the company and/or individual petitioner will run their operation and pay an agreed amount to their creditors
Consolidation, downsizing, and liquidation of certain assets are common restructuring plans.
Once a business and/or individual files Chapter 11 bankruptcy, the list of creditors have a right to either accept and/or contest the petition.
- Most creditors are grateful when a petitioner files Chapter 11 versus 7
- With Chapter 7, it is total liquidation and creditors will not get paid little or nothing unless the petitioner has substantial assets that is being liquidated
There are three types of creditors:
- Secured creditors
- Unsecured creditors
When the restructuring proposal is not approved, the petitioner can request for a “cramdown.”
- This strategy is when the judge steps in and forces all creditors to accept the proposal
- The repayment period is open
- There is no set repayment period like Chapter 13 repayment plan which is normally 60 months
- However, most Chapter 11 repayment plans do not exceed 24 months
The filing costs and fees on Chapter 11 are substantially more than Chapter 7 and 13. Just for filing fees on Chapter 11 is $1,717. You then add attorney fees which will range from a few thousand to millions of dollars for large businesses.
Benefits Of Filing Business Chapter 11
Chapter 11 Bankruptcy is a great tool for businesses that want to keep on operating but need some time to pay its debts.
- Petitioners can operate their business while they are in the Chapter 11 repayment plan
- However, any major business decisions, especially when it comes to purchases, need the approval of the court
- The court can appoint a trustee if the court finds a reason to do so such as incompetency and/or fraud
Major companies such as in the airline and automobile industries have filed Chapter 11 Bankruptcy.
Chapter 11 Personal Bankruptcy
Here is the main reason why consumers opt for Chapter 11 versus Chapter 7 and/or 13 Bankruptcy and here is why:
- Chapter 11 benefits consumers who do not want to keep their assets and do not want to liquidate them
- Chapter 11 benefits consumers who have too many outstanding debts that exceed Chapter 13 Bankruptcy
- Consumers cannot exceed $1,184,200 in secured debts
- Examples of secured debts are home loans, car loans, and other secured debts
- Cannot exceed more than $394,725 in unsecured debts such as credit cards
Chapter 11 Bankruptcy is often popular with many high-income earners such as real estate investors, professional athletes, and celebrities.
Differences Between Chapter 11 Versus 7 Bankruptcy
There is no reorganization with Chapter 7 Bankruptcy. Chapter 7 is the total liquidation of assets.
- Proceeds will go towards paying creditors
- However, most folks who file Chapter 7 have little to no assets
- Many may not even have jobs. To be eligible for Chapter 7, petitioners need to meet the Chapter 7 Means Test
- Higher-income wage earners are not eligible for Chapter 7
- Luxury non-essential assets are liquidated
- There are items that petitioners can keep such as pensions, reasonable necessary clothing, household goods and jewelry up to a certain value
- You can keep your home as long as it meets the exempt status of equity
- Filing fees on Chapter 7 is a $245 filing fee
- Most petitioners can have their Chapter 7 bankruptcy discharged after 90 days of filing
- A consumer can get a fresh financial start in life after Chapter 7 Bankruptcy discharge
- Homebuyers can qualify for a mortgage after Chapter 7 Bankruptcy discharged date after meeting the mandatory waiting period requirements
Gustan Cho Associates are experts in helping homebuyers qualify for a mortgage after bankruptcy.
Mortgage Guidelines After Chapter 7 Bankruptcy
Here are the waiting period requirements after Chapter 7 Bankruptcy discharged date:
- There is a two year waiting period after Chapter 7 discharged date to qualify for FHA and VA Loans
- There is a three-year waiting period after Chapter 7 discharged date to qualify for USDA Loans
- There is a four-year waiting period after Chapter 7 discharged date to qualify for conventional loans
Non-QM loans do not have any waiting period requirements to qualify for a home loan after bankruptcy discharged date.
Differences Between Chapter 11 Versus Chapter 13
Both Chapter 11 and Chapter 13 Bankruptcy are federal restructuring debt repayment programs.
- With Chapter 13 Bankruptcy, consumer secured debts cannot exceed $1,184,200
- Unsecured debts cannot exceed $394,725 to qualify for Chapter 13 Bankruptcy
- A trustee is always appointed in Chapter 13 repayment plans unlike Chapter 11
- The role of the trustee is to review and propose a repayment plan and collects the payments and pays the creditors
- The trustee has the power to dismiss and/or convert the Chapter 13 to Chapter 7 bankruptcy
- The trustee reports directly to the bankruptcy court judge
- The list of creditors does not have the right to vote on the restructuring plan like Chapter 11
The repayment period ranges from 36 to 60 months. Once the debtor has been timely with their monthly scheduled payment, the balance of the debt is discharged after the repayment period is over.
Mortgage Guidelines After Chapter 11 And 13 Bankruptcy
Mortgage guidelines after Chapter 13 and 11 are the same:
- For FHA and VA Loans, borrowers can qualify for a mortgage during Chapter 13 and 11 Bankruptcy after making 12 monthly timely payments to the trustee
- There are no waiting period requirements after Chapter 13 and 11 Bankruptcy discharged date
- Any bankruptcy discharge that has not been seasoned for at least 24 months needs to be manual underwriting
- There is a two-year waiting period after Chapter 13 and 11 discharged date to qualify for Conventional loans
- There is a four-year waiting period after Chapter 13 and/or 11 dismissal date
Non-QM loans do not have any waiting period requirements after bankruptcy.
Qualifying For A Mortgage With A Lender With No Overlays After Bankruptcy
Gustan Cho Associates are experts in helping borrowers after bankruptcy qualify for a mortgage. Gustan Cho Associates has no lender overlays on government and conventional loans. Over 75% of our borrowers are folks who could not qualify at other lenders. For more information about qualifying for a mortgage with a mortgage company with no lender overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at firstname.lastname@example.org. We have a national reputation of being a one-stop mortgage shop and being able to do loans other lenders cannot. Not only do we specialize in government and conventional loans with no lender overlays but we have dozens of non-QM and alternative financing loan programs on owner occupant, second homes, and investment property mortgages. Some of our most popular non-QM loan programs include mortgages one day out of bankruptcy, bank statement mortgages, asset-depletion loans, P and L non-doc stated income loans, fix and flip loans for real estate investors, and other alternative loan programs. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.