Refinancing During Chapter 13 Bankruptcy Repayment Plan

This Article Is About Refinancing During Chapter 13 Bankruptcy Repayment Plan

It is possible to do a Refinancing During Chapter 13 Bankruptcy Repayment Plan while your mortgage while in an active Chapter 13 bankruptcy.

  • There is no law governing this
  • It is entirely up to the individual(s) to find a willing lender
  • 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
  • Lender Overlays means they do not have to honor HUD Guidelines in qualifying for an FHA Loan during a Chapter 13 Bankruptcy
  • Some lenders will not allow borrowers to qualify for an FHA Loan until two years after a Chapter 13 Bankruptcy discharged date
  • Generally, lenders want to see one year of timely mortgage payments before considering a refinance
  • Similarly, lenders often offer loan modifications to individuals while in a Chapter 13 bankruptcy
  • In some circumstances, filing for relief under the bankruptcy code helps individuals obtain a loan modification due to the decrease in monthly expenses
  • Thereby allowing them to meet the lender’s debt to income requirements

In this article, we will discuss and cover Refinancing During Chapter 13 Bankruptcy Repayment Plan.

Loan Modifications And Refinancing During Chapter 13 Bankruptcy Repayment Plan

What are credit modifications and refinancing under the Chapter 13 bankruptcy payment plan

People often get loan modifications while in bankruptcy.

  • As I previously stated, once you file bankruptcy, it usually frees up some of your income and it might make it more feasible to get a loan modification
  • Sometimes lenders will require court approval before entering into a loan modification
  • However, at least in the jurisdiction where I practice, this is not necessary
  • Many judges will deny as unnecessary any motion brought to approve a loan modification

However, most judges recognize that lenders want court approval so that they do not run afoul of the automatic stay, and will usually grant such motions.

Can My Mortgage Payment Change While In A Chapter 13 Bankruptcy?

Yes, but only within the terms of your original mortgage.

  • If you had an adjustable-rate mortgage when you filed for bankruptcy, then the mortgage rate can change according to the terms of your mortgage
  • Conversely, if an individual had a fixed-rate mortgage before filing for bankruptcy, then their mortgage would be locked in at such a rate
  • The filing of the bankruptcy will have no bearing on the terms of your mortgage
  • When you are in an active Chapter 13 bankruptcy and your mortgage payment changes due to an adjustment in your interest rate or escrow payment, your lender will generally send you a “Notice of Mortgage Payment Change”
  • This is just a notice of your new payment amount
  • It will usually explain why there is an adjustment
  • Keep in mind that even though you may have a fixed interest rate, if your real estate taxes are paid through your mortgage and your taxes increase

This will result in increased mortgage payments just like it would if you were not in bankruptcy.

Qualification Requirements To Be Eligible For FHA Loan During And After Chapter 13 Bankruptcy

What are the eligibility requirements to qualify for an FHA loan during and after a Chapter 13 bankruptcy

Here are the FHA Guidelines in qualifying for an FHA Loan During And After Chapter 13 Bankruptcy:

  • Borrowers can qualify for an FHA Loan during Chapter 13 Bankruptcy one year into the Chapter 13 Bankruptcy repayment plan
  • 12 months of payments need to have been made to all of their creditors
  • No late payments to any creditors from the time they started their repayment plan
  • Verification of Rent is required
  • Minimum of 580 credit scores for 3.5% down payment home purchase loans
  • All Chapter 13 Bankruptcy during and/or after mortgage files are manual underwriting
  • There is no waiting period to qualify for an FHA after a discharged date of a Chapter 13 Bankruptcy

Underwriters will want to see that all payments to creditors have been made on time during their Chapter 13 Bankruptcy Repayment Period.

Qualifying For A Mortgage During And After Chapter 13 Bankruptcy

Not all lenders will do manual underwriting. FHA and VA loans are the only two home mortgage program that will allow manual underwriting during the Chapter 13 Bankruptcy repayment period. Chapter 13 Bankruptcy does not have to be discharged. There is no waiting period after the Chapter 13 Bankruptcy discharged date on FHA and VA loans. However, if the Chapter 13 bankruptcy was not seasoned for two years after the Chapter 13 bankruptcy discharged date, the file needs to be manually underwritten. A large percentage of our files at GCA Mortgage Group are manually underwritten. We are experts in originating manually underwritten FHA and VA loans. Gustan Cho Associates has no overlays on government and conventional loans. Borrowers can also do a cash-out refinance during the Chapter 13 Bankruptcy repayment plan. Borrowers can also do cash-out refinance after the Chapter 13 Bankruptcy discharged date with no waiting period.

9 Comments
  1. Rhonda Cummings

    Good afternoon, I came across your website and saw your youtube video about W2 only mortgages and I would like more information. I currently reside in Georgia. Do you have an office here, looks like your licenses here. Let me know who I can speak more with about the W2 only mortgages.
    Looking forward to hearing from you,
    Thank you
    Rhonda Cummings

  2. gregory edward mcdaniel says

    i am interested in a refi while in chapter 13

    1. Gustan Cho, NMLS 873293 says

      You came to the right place. Can you please email us your contact information at gcho@gustancho.com or call us at 262-716-8151 or text us for a faster response.

  3. Sonya says

    Interested in possible assist to re-finance. I have a Chpt 13 that I am paying. Thank you. I reside in Alabama. Would like to get a new mortgage company if possible.

    1. Gustan Cho, NMLS 873293 says

      We are licensed in Alabama and we can help you refinance during the Chapter 13 Bankruptcy repayment period without your bankruptcy being discharged. Please reach out to us at gcho@gustancho.com or call us at 262-716-8151 or text us for a faster response.

  4. Niki Schoggen says

    Hi! We are in a chapter 13 thanks to Covid and the judge actually suggested trying to find a mortgage company to refi our mortgage. We are in Tennessee. Is that something for which you guys can direct us?

    1. Gustan Cho, NMLS 873293 says

      Good afternoon Nikki. We are licensed in Tennessee and can help you refinance your home mortgage during Chapter 13 bankruptcy repayment period without your Chapter 13 Bankruptcy being discharged. Please reach out to us at gcho@gustancho.com or call us at 262-716-8151 or text us for a faster response.

  5. Pamela Meredith says

    I’m also interested in refinancing while in Ch. 13 in Indiana. 14 yr. home residence. Same loan, different lender (original lender previously bought out). Please email me with information I may need and that you would need. Thank you.

    1. Gustan Cho, NMLS 873293 says

      Please email us your contact information at gcho@gustancho.com or contact us at 262-716-8151 or text us for a faster response.

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