CHAPTER 13 BANKRUPTCY BUYOUT

Refinancing out of a Chapter 13 Bankruptcy is sometimes referred to as a “Chapter 13 Bankruptcy Buyout” or a “BK Buyout”.

If your potential loan is within the FHA loan limits for the particular county in which you reside, and, if you are in a Chapter 13 bankruptcy, a FHA loan is a great alternative to a sub-prime loan. Do not be fooled into thinking that you have to have a loan with a high interest rate and terrible terms just because you are in Chapter 13. That is not the case.

It is in your best interest to first consult with a mortgage broker who is approved to do FHA loans and who not only thoroughly understands the requirements of an FHA loan and the specific underwriting requirements to FHA as they may relate to a Chapter 13 bankruptcy, but one who also understands the Chapter 13 process and the requirements for the bankruptcy buyout.

With this being said, sometimes circumstances beyond your control may have caused you to be delinquent with your Chapter 13 payments, or, you may have otherwise had some problems while you were in Chapter 13. Maybe a FHA loan and the requirements for FHA financing will not work for you. If you are desirous of paying off your case and still want to try to refinance into a new mortgage, there are alternatives to FHA. There are lenders that offer other programs that your mortgage broker or loan officer can discuss with you. The bottom line is that you should make sure that you are being put into the best possible loan program and rate for which you qualify.

Your new loan needs to “make sense”. There has to be a benefit to you for refinancing out of Chapter 13 in terms of a better loan program and rate for your mortgage, such as going into a fixed rate mortgage and out of an adjustable rate mortgage, having a new mortgage payment for the new loan that will be less than your current mortgage payment, and/or your monthly outlay will be less, to give a few examples.

Do not rush into a refinance out of Chapter 13 without knowing all of the ramifications of paying off the Chapter 13 case, including what your potential payoff will be. Chapter 13 can be a long process. I understand that. Chapter 13 means strict budgeting and living without the “extras”. It may seem like you are never going to get out of Chapter 13. Let the Chapter 13 work for you and help you to get a fresh start. Don’t rush into a new loan that may put you back into the same position you were in when you had to file Chapter 13. Do your homework. Make sure any new loan you are told you qualify for is the right loan for you.

Do not let your mortgage broker or loan officer promise rates to you that cannot be delivered. It is prudent to “shop around” for the best rate and program for which you may qualify. There are those that send out mailers or make calls to you just because they obtained your name from a list of people that are in bankruptcy, and sometimes these mailers and phone calls promise “teaser” rates to get you to respond. While you may be able to get into a good fixed-rate FHA loan with a good interest rate, that does not mean that you are going to qualify for the “1%” or “2%” starter rates if you have a Chapter 13 on your credit. I have seen mailers that some of my clients have received while they are in Chapter 13, and I can tell you that a lot of the mailers have statements or promise that just are not true or cannot be fulfilled. Talk to an experienced mortgage broker or loan officer and do your due diligence before you agree to go into a new loan that will only hurt you in the end. Ask your mortgage broker or loan officer for references. Good mortgage brokers and loan officers that are familiar with the bankruptcy payoff process may very well be getting referrals from local attorneys who trust them to do a great job for clients. Ask your mortgage broker or loan officer for attorney references. The mortgage broker or loan officer who has attorneys referring clients to him or her is the one you want to do your loan for your Chapter 13 buyout, as that mortgage broker or loan officer already has the confidence of the referring attorney, and you can rest assured that this mortgage broker or loan officer will do everything within his or her power to take care of you and the attorney from whom referrals come. Call 1.888.788.5551 or 1-888-788-5551 to discuss your options and to get referrals from some local attorneys who have referred clients for bankruptcy buyouts.

Do not let your mortgage broker or loan officer charge you high points or fees to do your loan just because you are in Chapter 13. There are mortgage brokers and loan officers that understand your situation, are empathetic to your situation, and who truly desire to help you get a fresh start after bankruptcy and without charging you high rates and fees to do your loan. To discuss your options with an experienced mortgage broker who will keep your best interest in mind, who will treat you as you would want to be treated, and who will offer an in-depth consultation as to your options to buy out of your Chapter 13 bankruptcy, call 1.888.788.5551 or 1-888-788-5551. The in-depth consultation can be held at your home or office and/or during after-work hours if that is more convenient for you.

It is prudent to discuss a refinance with your bankruptcy attorney to insure that it is in your best interest to buy out of your bankruptcy at the time you desire to refinance.

For example, while you may want to refinance now, and, while you may be a great candidate for an FHA loan, it may not be in your best interest to pay off the Chapter 13 bankruptcy now. There are certain requirements for the amount to be paid to the unsecured creditors in Chapter 13, and there are certain timeframes during a Chapter 13 case which will determine the amount of the payout to the unsecured creditors in your case, should you desire to pay off your case during the term of your Chapter 13 Plan. This is why it is important for you to seek counsel from your attorney as to the appropriate time to try to refinance out of your Chapter 13 case.

There are many people in Chapter 13 that have adjustable rate mortgages. An adjustable rate mortgage can cause the demise of your Chapter 13 case if you cannot afford to make the new mortgage payment once your rate adjusts. If you have an adjustable rate mortgage, and, if you can barely make the mortgage payment (in or outside of your Chapter 13 Plan) as it is, and you know that your interest rate is about to adjust or has already adjusted, it is wise to consult with a mortgage broker or loan officer and your attorney to see if it would be in your best interest to try to refinance out of the case and to pay off your Chapter 13 case now. The answer may be that it is better for you to refinance out of the Chapter 13 case later on and after you have been in your Chapter 13 Plan for more time.

Rules and procedures specific to paying off your Chapter 13 by way of refinance of your mortgage are specific to the Bankruptcy Court, District, and Division in which your case was filed. Call your Trustee or your attorney and familiarize yourself with the payoff procedures specific to the Court and to the Trustee for your case.

In the Bankruptcy Court for the Middle District of Florida, Orlando Division, you must obtain Trustee or Court approval to incur any new debt. This includes a refinance into a new mortgage.

If you have made at least twelve (12) payments to the Chapter 13 Trustee timely, and if you have otherwise kept your post-Petition credit clean and without any derogatory credit, a FHA loan may be possible. Further, if you have not incurred any post-Petition debt, such as taxes owed but not paid, and, if you have otherwise followed all directives of the Court as to your Chapter 13 Plan, turning in tax returns and income tax refunds to the Trustee, and otherwise following all of the “rules” of Chapter 13, you may very well obtain Trustee approval for your refinance and eventual payoff of your Chapter 13 case.

For a consultation with an experienced mortgage broker, call 1.888.788.5551 or 1-888-788-5551 to discuss your options for paying off your Chapter 13 case.