Refinancing During Chapter 13 Bankruptcy Repayment

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Is it Possible to Refinance During Chapter 13 Bankruptcy?

Yes, refinancing during Chapter 13 bankruptcy is possible! Many homeowners think they must wait until after bankruptcy to refinance, but that’s not true. FHA and VA loans allow refinancing during an active repayment plan, but you must meet lender and court requirements.

At Gustan Cho Associates, we specialize in helping borrowers refinance during Chapter 13 bankruptcy—even when other lenders say no. This guide explains how to refinance, loan options, and how to get approved quickly.

How Can I Get Out of Chapter 13 Early?

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If you want to exit Chapter 13 early, you have a few options:

• Pay off your repayment plan early (only if allowed by the court)
• Request a hardship discharge (if you face financial setbacks like job loss or medical issues)
• Convert to Chapter 7 (only if you qualify based on income)
• Refinance your mortgage (use home equity to pay off your remaining balance)

Many homeowners look into refinancing during Chapter 13 bankruptcy. This means they are trying to get a new loan to take out some of the value they have built in their homes. By doing this, they can use that money to pay off their bankruptcy plan sooner. It’s a way to manage their finances better and get things straightened out more quickly.

Can You Finance a House While in Chapter 13?

Yes, you can! If you want to buy a new home while in Chapter 13, here’s what you need:

• 12+ months of on-time Chapter 13 payments
• Trustee approval (your bankruptcy court must allow the purchase)
• FHA or VA loan approval (Conventional loans typically require bankruptcy discharge)

In Chapter 13 bankruptcy, VA and FHA loans are unique because they let you refinance your current loan. This means you can lower your payments or get a better interest rate in bankruptcy. Plus, these loans can help you buy a home before your bankruptcy is fully discharged. So, if you’re considering refinancing during Chapter 13 bankruptcy, these might be your options.

Is Refinancing During Chapter 13 Bankruptcy Possible with FHA?

If considering refinancing during Chapter 13 Bankruptcy, you should know that it’s possible to qualify for an FHA refinance or purchase loan even while you’re still in bankruptcy. This means you can still make your financial plans work while getting a new loan as long as you meet these requirements:

• 12 months of on-time bankruptcy payments required
• Manual underwriting required
• Minimum credit score of 580
• Debt-to-income ratio limits apply
• Court/trustee approval required

Under HUD guidelines, borrowers are eligible to qualify for an FHA Loan one year into a Chapter 13 Bankruptcy Repayment Period. However, many lenders have overlays. Many lenders have overlays (extra restrictions), but Gustan Cho Associates has no lender overlays, which means we approve loans based on FHA guidelines only.

What Gets Discharged in Chapter 13?

Once you complete your Chapter 13 repayment plan, eligible debts are discharged. These typically include:

• Credit cards
• Medical bills
• Personal loans
• Unsecured debts

However, mortgages and car loans are not discharged, so refinancing during Chapter 13 bankruptcy can help you restructure debt before completing your plan.

Is It Hard to Get a Loan After Chapter 13?

Not necessarily! If you’re looking to buy a home, you might think filing for Chapter 13 bankruptcy would stop you from getting a mortgage for a long time. But that’s not the case with FHA and VA loans. These types of loans let borrowers secure a mortgage right after their Chapter 13 bankruptcy is discharged, meaning there’s no waiting period!

In fact, many homeowners take advantage of the opportunity by refinancing during Chapter 13 bankruptcy. This allows them to lock in a better interest rate before their bankruptcy case is fully finished. So, if you’re in this situation, don’t lose hope—you have options.

Can You Modify Your Loan While You are in Chapter 13 Bankruptcy?

Yes, but many homeowners choose to refinance over loan modification because:

• Refinancing gets better loan terms
• FHA and VA loans allow cash-out options
• You don’t need lender approval like with modifications

If your current mortgage is too expensive, refinancing during Chapter 13 bankruptcy might be the better solution.

What is the Repayment Period for Chapter 13?

Chapter 13 repayment plans usually last 3 to 5 years, and the exact length depends on several important factors.

First, it often hinges on your income—if you have a higher income, you might be looking at a 5-year plan. Second, your total debt amount can significantly affect how long you will be in repayment. Finally, you’ll need to get approval from the court, which will consider all of these factors.

Many homeowners consider refinancing during Chapter 13 bankruptcy a smart move. This strategy can help them rearrange their finances, which might allow them to pay off their debts faster and avoid the long-term commitment of making payments for several years.

Can You Discharge a Mortgage in Chapter 13?

Filing for Chapter 13 Bankruptcy does not mean your mortgage has been settled. You still have to keep making payments on it. If you stop, the bank can still take your home. It’s important to understand that your lender still has rights, and you need to stay on top of your mortgage payments.

However, you can refinance your mortgage to lower payments, switch to a fixed-rate loan, or cash out equity while in Chapter 13.

Does Chapter 13 Take Your Savings?

When thinking about Chapter 13 bankruptcy, many wonder if it will affect their savings. In most cases, the answer is no; your savings generally won’t be taken away. However, the court might look closely at any large amounts of money you saved.

If it appears that you have more than what is needed for emergencies, the court could suggest that this money should be used to pay off your debts.

A common strategy for borrowers in this situation is refinancing during Chapter 13 bankruptcy. This means adjusting your loans to get better terms or lower payments, which helps you keep your savings intact. Doing this lets you focus on paying down your debts without losing the financial cushion you’ve built up.

How to Get Started

If you’re considering refinancing during Chapter 13 bankruptcy, we can help. At Gustan Cho Associates, we specialize in FHA and VA loans for borrowers in active bankruptcy.

Call or text us today at 800-900-8569 or email alex@gustancho.com to see how much you can save! No lender overlays – Just agency guidelines! Fast closings – Get approved in as little as 30 days!

Frequently Asked Questions About Refinancing During Chapter 13 Bankruptcy:

Q: Can I Refinance My Home While in Chapter 13 Bankruptcy?

A: Yes! Refinancing during Chapter 13 bankruptcy is possible with FHA and VA loans. You must have made at least 12 months of on-time bankruptcy payments, get court approval, and meet lender requirements.

Q: Do I Need Trustee Approval to Refinance During Chapter 13?

A: Yes, your bankruptcy trustee must approve your refinance. Lenders require a court-approved letter showing that refinancing will improve your financial situation.

Q: What Type of Loan Can I Use to Refinance in Chapter 13?

A: FHA and VA loans allow refinancing during Chapter 13 bankruptcy. Conventional loans typically require you to wait until after your bankruptcy is discharged.

Q: Can I Get Cash-Out Refinancing While in Chapter 13 Bankruptcy?

A: Yes! FHA and VA loans allow cash-out refinancing during Chapter 13 bankruptcy. You can use home equity to pay off your bankruptcy or other debts.

Q: How Long do I have to Wait After Filing for Chapter 13 to Refinance?

A: You must have made at least 12 on-time bankruptcy payments before you can refinance. However, you don’t need to wait until your bankruptcy is discharged.

Q: Will Refinancing Remove My Chapter 13 Bankruptcy from My Credit Report?

A: No, your bankruptcy will still appear on your credit report until it is removed after 7 years. However, refinancing can help improve your credit score over time.

Q: How does Refinancing During Chapter 13 Bankruptcy Affect My Mortgage Payments?

A: Refinancing can be a strategic avenue for reducing borrowers’ interest rates, which in turn can lead to decreased monthly payments and overall expenses. When considering refinancing during Chapter 13, borrowers can switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.

Q: What Credit Score do I Need to Refinance During Chapter 13 Bankruptcy?

A: FHA loans usually require 580 minimum credit score for accessibility, while VA loans have no specific score requirement but need lender approval for flexibility.

Q: Can I Refinance with Late Payments on My Bankruptcy Plan?

A: No, lenders require 12 months of on-time payments during Chapter 13 before they approve a refinance.

Q: How Can I Start the Refinancing Process During Chapter 13 Bankruptcy?

A: Contact Gustan Cho Associates today! We specialize in refinancing during Chapter 13 bankruptcy, offering fast approvals with no lender overlays. Call us now to see how much you can save!

This blog about “Refinancing During Chapter 13 Bankruptcy Repayment Plan” was updated on February 17th, 2025.