This article will discuss the buy-out cash-out refinance option for VA Chapter 13 Bankruptcy. A VA Chapter 13 Bankruptcy buy-out can be accomplished using a cash-out refinance on VA home loans while under a Chapter 13 Bankruptcy repayment plan. The widespread financial hardship caused by the coronavirus pandemic outbreak in February 2020 has significantly affected many Americans.

The coronavirus outbreak severely impacted the U.S. economy. The situation was exacerbated by the liberal media and left-wing politicians, who created panic and politicized the COVID-19 outbreak.

Fear-mongering became prevalent among many state governors and politicians. Corruption increased at various government levels, including city, county, state, and federal. Several states received orders to close. The professionals at Gustan Cho Associates specialize in helping individuals who own homes with VA Chapter 13 Bankruptcy buy-outs through cash-out refinance while on a Chapter 13 repayment plan.

How The COVID-19 Scare Tactic Forced Small Business Owners To Close

Many hard-working American small business owners and employees of small businesses suffered enormous losses when they were forced to file for bankruptcy. The coronavirus outbreak created an economic, social, and political meltdown. One of the hardest-hit industries was the mortgage industry.

Many employees of mortgage companies were forced to be remote. Many brick-and-mortar lenders removed their brick-and-mortar locations and went virtual with Zoom and other technology.

It changed the entire mortgage industry. Most non-QM lenders went out of business. Two non-QM lenders suspended operations until further notice. Major mortgage guideline changes are expected on non-QM loans when they open up. Some changes will be higher credit scores, larger down payments, and lower debt-to-income ratio caps. The coronavirus pandemic has hit government and conventional loans hard.

Many small businesses like restaurants were ordered to close by local, county, and state governments for months. Millions of Americans have filed for bankruptcy due to the government shutdowns and extended coronavirus state shutdown orders by governors. There are two types of bankruptcies: Chapter 7 and Chapter 13 Bankruptcy.

Can I Qualify For a VA Loan After Chapter 7 Bankruptcy?

Homebuyers can qualify for a VA loan after Chapter 7 Bankruptcy after meeting a two-year waiting period requirement from the discharge date of Chapter 7. You need to have been timely on all of your monthly debt payments after the Chapter 7 Bankruptcy discharge date with no late payments. Borrowers should start rebuilding and re-establishing their credit after being discharged from the Chapter 7 Bankruptcy. Click here to qualify for a VA Loan after Chapter 7 Bankruptcy

How Can I Do VA Chapter 13 Bankruptcy Buy-Out To End Chapter 13 Early?

Mortgage borrowers can qualify for only two loan programs while in Chapter 13 Bankruptcy: FHA and VA loans. Chapter 13 Bankruptcy is a court-approved debt restructuring and repayment plan. The repayment term is three to five years, with a five-year repayment plan being more popular. Consumers who are in debt and do not have the income to pay the debt satisfactorily every month can file for Chapter 13 Bankruptcy protection.

Do you Get Money Back After Chapter 13 Discharge?

In a Chapter 13 bankruptcy, any money not used to pay creditors under your repayment plan might be returned to you after discharge. When you complete the payments according to your court-approved plan over three to five years, the bankruptcy trustee disburses these payments to creditors.

If there are leftover funds after all creditor payments have been made, these surplus funds may be returned to you. Changes in your financial situation during the repayment period can lead to adjustments in your plan, which might impact any potential surplus.

Understanding the financial outcomes post-discharge for veterans considering a VA Chapter 13 Bankruptcy Buy-Out is crucial. After completing your repayment plan and receiving a discharge, you might explore options like VA Home Loans to re-establish your financial footing and possibly buy a home. These loans offer favorable terms and can be a vital tool for veterans looking to regain stability and invest in property post-bankruptcy. Consulting with your bankruptcy attorney and a VA loan specialist can provide tailored advice based on your situation.

How Soon Can You Apply For a VA Loan After Filing For Chapter 13?

Mortgage borrowers can qualify for an FHA or VA loan while in a Chapter 13 Bankruptcy repayment plan. Homebuyers and homeowners can qualify for a VA loan after 12 months of filing Chapter 13 Bankruptcy and making 12 satisfactory, timely monthly payments to the Bankruptcy Trustee. Homebuyers can apply for a home purchase loan on VA loans. Homeowners with equity can do a VA Chapter 13 Bankruptcy buy-out by doing a cash-out refinance with a VA loan.

Will Trustee Sign Off on VA Chapter 13 Bankruptcy Buy-Out?

The bankruptcy trustee must sign off on the mortgage, whether a home purchase, refinance, or a VA Chapter 13 Bankruptcy buy-out with a cash-out refinance. A common question from people who filed Chapter 13 during the coronavirus economic turmoil with state shutdowns is how soon can you apply for credit after filing Chapter 13? Mortgage borrowers can qualify for a home purchase or refinance mortgage loan while in a Chapter 13 repayment plan after 12 months from the filing date and have made 12 months of timely payments. Click here to qualify for VA Loan after chapter 13 Bankruptcy 

Can Chapter 13 Be Discharged Early?

Five years is a very long time to be under the jurisdiction of the U.S. Bankruptcy Courts. Your financial freedom is limited while on the Chapter 13 repayment plan. You need permission from the bankruptcy trustee for any major purchase, to buy a car, get a mortgage, and even get a few secured credit cards. One of the frequently asked questions from our clients is: can Chapter 13 be discharged early? The answer is YES.

VA Chapter 13 Bankruptcy Buy-Out Ends Chapter 13 Early

Homeowners with substantial home equity can do a VA Chapter 13 Bankruptcy buy-out through a VA cash-out refinance mortgage. VA loans allow up to a 100% loan-to-value on VA cash-out mortgage loans. With the proceeds, the homeowner can do a VA Chapter 13 Bankruptcy buy-out and get the Chapter 13 Bankruptcy discharged sooner rather than later.

The team at Gustan Cho Associates has helped thousands of clients get their credit scores to over 700 FICO within 12 months from their discharge date. Most of our borrowers at Gustan Cho Associates work with us on credit fixes and rebuilds when they get discharged from Chapter 7. There is no cost for us to help our future homebuyers after Bankruptcy. Most of our borrowers who work with us after their Chapter 7 discharge have credit scores close to 700 or higher than 700 within two years of the discharge date of their Chapter 7.  In the next paragraph, we will cover and discuss qualifying for an FHA loan during and after Chapter 13 Bankruptcy. Speak With Our Loan Officer for Mortgage Loans with low credit scores

The Best Mortgage Lenders For VA Chapter 13 Bankruptcy Buy-Out With No Overlays

Over 95% of the lenders have changed their VA lending guidelines by imposing strict lender overlays. Most lenders now require a 640 credit score or higher. Any VA loans under 680 FICO will most likely be charged discount points. Gustan Cho Associates Mortgage Group is one of the few mortgage lenders that will approve VA loans for borrowers under 620 credit scores. This article will discuss and cover VA Loans Under 620 FICO During the Coronavirus Pandemic Crisis.

Mortgage Rates on VA Loans Under 620 FICO

The coronavirus pandemic has shaken up the mortgage market. Mortgage rates hit a historic low. However, lenders are increasing mortgage rates for borrowers with lower credit scores. Most lenders with no or limited lender overlays have completely changed their credit score requirements. Most lenders have placed lender overlays on credit scores of 640 or higher. VA loans for borrowers under 680 FICO have skyrocketed.

Why Lenders Stopped Originating VA Loans Under 620 FICO

President Donald Trump signed the $2 trillion stimulus bill passed by the Senate and House of Representatives into law last week. Included in the bill was a law that gives unemployed homeowners the option to suspend their mortgage payments for up to 12 months. This is called a mortgage forbearance. So, any unemployed homeowner can contact their mortgage servicer and request a forbearance for up to 12 months. This will not negatively affect the borrower’s credit scores. However, the mortgage servicer still needs to pay interest and principal payments to the investor.

Best Mortgage Lenders For VA Manual Underwriting 

On top of that, the servicer needs to pay property taxes and homeowners insurance for borrowers who have escrows. The stimulus package did not include any relief for nonbank mortgage servicers. Banks such as JP Morgan Chase, Bank of America, Wells Fargo, and other FDIC banks are not seriously affected because they can borrow the principal and interest payments to investors from the Fed. Nonbank servicers cannot borrow from the Federal Reserve Board. Speak With Our Loan Officer for Mortgage Loans

FAQs: VA Chapter 13 Bankruptcy Buy-Out Cash-Out Refinance

• 1. What is a VA Chapter 13 Bankruptcy Buy-Out? A VA Chapter 13 Bankruptcy Buy-Out is a financial strategy that allows individuals to refinance their mortgage through a VA home loan. At the same time, they are under a Chapter 13 Bankruptcy repayment plan. This can help homeowners access cash and potentially discharge their bankruptcy early.
• 2. How does the buy-out cash-out refinance work? The buy-out cash-out refinance involves a new VA home loan to pay off the existing mortgage and access additional funds from the home’s equity. This can be done under the Chapter 13 repayment plan, providing financial relief and the possibility of early discharge from bankruptcy.
• 3. How did the coronavirus pandemic impact VA Chapter 13 Bankruptcy Buy-Outs? The coronavirus pandemic caused widespread financial distress, significantly impacting many Americans, including small business owners and employees. This economic hardship led to increased bankruptcy filings, including those seeking VA Chapter 13 Bankruptcy Buy-Outs to manage their debts and rebuild their financial stability.
• 4. Can I qualify for a VA Home Loan after filing for Chapter 7 Bankruptcy? Homebuyers can qualify for a VA home loan after Chapter 7 Bankruptcy. Still, they must meet a two-year deadline requirement from the discharge date. They also need timely payments on all monthly debts after the discharge with no late payments.
• 5. How can I use a VA Chapter 13 Bankruptcy Buy-Out to end Chapter 13 early? Homeowners with substantial home equity can utilize a VA Chapter 13 Bankruptcy Buy-Out through a VA cash-out refinance mortgage. This allows them to access up to 100% loan-to-value on VA cash-out mortgage loans and use the proceeds to discharge the Chapter 13 Bankruptcy sooner.
• 6. Will the bankruptcy trustee sign off on a VA Chapter 13 Bankruptcy Buy-Out? Yes, the bankruptcy trustee must sign off on the mortgage, whether a home purchase, refinance, or a VA Chapter 13 Bankruptcy Buy-Out with a cash-out refinance. This approval is necessary to proceed with the transaction.
• 7. How soon can I apply for a VA loan after filing for Chapter 13 Bankruptcy? Borrowers seeking VA home loans can become eligible for a Chapter 13 Bankruptcy repayment plan after completing 12 acceptable and punctual monthly payments to the Bankruptcy Trustee. This applies to a home purchase loan and a VA Chapter 13 Bankruptcy Buy-Out through a cash-out refinance.
• 8. Can Chapter 13 Bankruptcy be discharged early? Absolutely, it is possible to achieve early discharge in Chapter 13 Bankruptcy. Individuals who own homes with significant equity can use a VA Chapter 13 Bankruptcy Buy-Out to attain an early discharge, thereby reclaiming financial independence sooner.
• 9. How has the mortgage industry been affected by the coronavirus pandemic? The coronavirus pandemic has significantly affected the mortgage industry, leading to changes such as remote working for employees, the closure of brick-and-mortar locations, and an increase in mortgage guideline requirements. Many non-QM lenders quit business or suspended operations, resulting in stricter credit scores and loan-to-value requirements.
• 10. How can I rebuild my credit during and after bankruptcy for mortgage approval? Rebuilding credit can be achieved by using secured credit cards and maintaining timely payments on all debts. Working with mortgage professionals, like those at Gustan Cho Associates, can help improve credit scores to over 700 FICO within 12 months from the discharge date, positioning borrowers for future mortgage approval.

If you have any questions about VA Chapter 13 Bankruptcy Buy-Out Cash-Out Refinance or you need to qualify for VA home loans with a lender with no overlays, please contact us at 800-900-8569. Text us for a faster response. Or email us at alex@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, on evenings, weekends, and holidays.

This blog about VA Chapter 13 Bankruptcy Buy-Out Cash-Out Refinance was updated on June 12th, 2024.