HUD Chapter 13 Bankruptcy Guidelines And Requirements

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HUD Chapter 13 Bankruptcy Guidelines And Requirements

This BLOG On HUD Chapter 13 Bankruptcy Guidelines And Requirements Was UPDATED On September 27th, 2019

HUD Chapter 13 Bankruptcy Guidelines And Requirements
Gustan Cho Associates Mortgage Information Center

HUD Chapter 13 Bankruptcy Guidelines states the FHA Loan Requirements for the following:

  • HUD Chapter 13 Bankruptcy Guidelines states the FHA Loan Requirements for borrowers who are in progress in a Chapter 13 Bankruptcy Repayment Plan can qualify for FHA Home Loans
  • HUD Chapter 13 Bankruptcy Guidelines states the FHA Loan Requirements for borrower who have just had their Chapter 13 Bankruptcy discharged
  • HUD, the United States Department of Housing and Urban Development, is the parent of the Federal Housing Administration or FHA.
  • FHA is not a mortgage lender
  • FHA is a division of HUD
  • Its role and purpose is to insure private lenders who follow FHA guidelines
  • If banks and mortgage lenders who are FHA approved lender follow FHA Guidelines , FHA will insure those banks and lenders in the event if Borrowers defaults on their FHA Loans and goes into foreclosure

In this article, we will cover and discuss HUD Chapter 13 Mortgage Guidelines during and after Chapter 13 Repayment Plan.

HUD Guidelines On Bankruptcy

HUD Guidelines On Bankruptcy

HUD is the parent of FHA.

  • FHA is not a mortgage lender
  • FHA is a government agency under the United States Department of Housing and Urban Development and sets the FHA Guidelines After Bankruptcy
  • Borrowers can qualify for FHA Loans after bankruptcy

Types Of Consumer Bankruptcies

What are Types Of Consumer Bankruptcies

There are two types of Bankruptcies for consumers:

  • Chapter 7 Bankruptcy: Chapter 7 Bankruptcy is also called total liquidation
  • There are requirement in qualifying for Chapter 7 Bankruptcy
  • Consumers have a maximum amount of money they can make in order to qualify for a Chapter 7 Bankruptcy
  • All of their assets needs to be disclosed
  • Chapter 7 Bankruptcy are best suited for consumers who are unemployed and have little to no assets and are downing in debt
  • Once you file a Chapter 7 Bankruptcy, the Bankruptcy Trustee will review all the assets and debts and all of the consumer’s debts are normally discharged in 90 days
  • A Chapter 7 Bankruptcy discharge will wipe out all of the consumer’s debts and the consumer will be debt free after the Chapter 7 Bankruptcy discharge
  • Borrowers can qualify for a FHA Loan two years after a Chapter 7 Bankruptcy discharged date
  • Needs re-established credit and no late payment history after the Chapter 7 Bankruptcy discharged date

Chapter 13 Bankruptcy Mortgage Guidelines

What are Chapter 13 Bankruptcy Mortgage Guidelines

Chapter 13 Bankruptcy: A Chapter 13 Bankruptcy is when the Bankruptcy Courts appoints a Chapter 13 Bankruptcy Trustee:

  • The Trustee will go over the petitioner’s gross income and take a percentage of their income and use that portion to pay the consumer’s creditors
  • A repayment plan of normally 60 months is set up by the Chapter 13 Bankruptcy Trustee and after that repayment period is over, the remaining debts will be discharged by the Bankruptcy Courts
  • Borrowers can qualify for a FHA Loan while they are in the repayment period of the Chapter 13 Bankruptcy

Borrowers can also qualify for FHA Loans after discharged date of the Chapter 13 Bankruptcy which we will cover in the following paragraphs.

FHA Guidelines On Chapter 13 Bankruptcy

FHA Guidelines On Chapter 13 Bankruptcy

There are two ways of qualifying for FHA Loan for borrowers on Chapter 13 Bankruptcy.

  • Borrowers who are currently in a Chapter 13 Bankruptcy Repayment Plan can qualify for a FHA Loan one year into a Chapter 13 Bankruptcy
  • Borrowers who have had their Chapter 13 Bankruptcy Discharged can qualify for a FHA Loan on day after their Chapter 13 Bankruptcy discharged date

Unfortunately, most mortgage lenders have mandatory waiting period after a Chapter 13 Bankruptcy discharged date of one to two year waiting period after the discharged date. This holds true although HUD Chapter 13 Bankruptcy Guidelines states that there is no waiting period required.

HUD Bankruptcy Guidelines During Chapter 13 Repayment Period

HUD Bankruptcy Guidelines During Chapter 13 Repayment Period

HUD Chapter 13 Bankruptcy Guidelines to qualify for a FHA Loan for borrowers while they are in an active Chapter 13 Repayment Period is a follows:

  • Borrowers who are currently on a Chapter 13 Bankruptcy Repayment period can qualify for a FHA Loan one year into the Chapter 13 Bankruptcy Repayment period
  • But the FHA Loan needs to be manually underwritten
  • Verification of Rent is required with manual underwriting 
  • 12 months of timely payments to all creditors needs to be provided to the lender
  • Chapter 13 Bankruptcy Trustee Approval required
  • Compensating Factors required

No late payments in past 12 months.

HUD Bankruptcy Guidelines After Chapter 13 Bankruptcy Discharged

HUD Bankruptcy Guidelines After Chapter 13 Bankruptcy Discharged

HUD Bankruptcy Guidelines After Chapter 13 Bankruptcy Discharged Date states that no mandatory waiting period is required.

Here are the guidelines:

  • No waiting period is required to qualify for a FHA Loan after a Chapter 13 Bankruptcy discharged date
  • All borrowers who had a Chapter 13 Bankruptcy discharge and has not met a two year waiting period after the Chapter 13 Bankruptcy discharged date, they will qualify for a FHA Loan
  • However, it needs to be manually underwritten
  • All manual underwriting requires VOR, which is verification of rent

Issues With Qualifying For FHA Loan After Chapter 13 Bankruptcy Discharge

Issues With Qualifying For FHA Loan After Chapter 13 Bankruptcy Discharge

Most lenders have issues with approving FHA Loans right after a Chapter 13 Bankruptcy discharged date.

  • Most mortgage lenders will have lender overlays after Chapter 13 Bankruptcy discharge date by requiring the following
  • There is NO WAITING PERIOD to qualify for FHA Loan after Chapter 13 Bankruptcy discharged date
  • However, if the borrower had a Chapter 13 Bankruptcy discharge that has not been seasoned for at least two years, then the mortgage loan needs to be a manual underwriting
  • Most lenders will set mandatory waiting period after discharged date of Chapter 13 Bankruptcy discharged date of at least one year waiting period
  • Or two year waiting period after the Chapter 13 Bankruptcy discharged date
  • This is not a HUD Chapter 13 Bankruptcy Guidelines but a mortgage lender overlay on behalf of the individual lender

If you are in a Chapter 13 Bankruptcy Repayment Plan or have just been discharged of your Chapter 13 Bankruptcy and need further information in qualifying for a FHA Loan, please contact Gustan Cho at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

1 Comment
  1. Gustan Cho, NMLS 873293 says

    I retained Attorney James Miller for my bankruptcy. Never in my life have I met a professional who is so articulate, knowledgeable, professional, personable, and most of all, reasonable. My bankruptcy case was very difficult. I have many properties prior to the 2008 Great Recession and had creditors still hound me after 10 years. Mr. Miller has a professional staff and has a five star system where his support staff makes the bankruptcy process very streamlined and easy. I hired three other bankruptcy attorneys over the years to no avail where eventually they could not help me. Mr. Miller and his Office Manager Nicole Thompson fully explained all of my questions during my free consultation. Manager Nicole Thompson is always on top of things. Both Attorney Miller and Manager Nicole Thompson always return calls and emails promptly. I fully highly recommend the Law Offices of Miller and Miller of Milwaukee, Wisconsin. Hands down, you will never meet a team of professionals who take pride in helping consumers get a fresh start with their financial life. FIVE PLUS STARS AND MORE. Keep up the great work James Miller and Team. Mr. Miller and Team are a Godsend. They are hands down the best bankruptcy professionals in the country.

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