Can I refinance a mortgage in Chapter 13 bankruptcy?
Yes, it is possible to refinance a mortgage in Sacramento bankruptcy lawyer, however, as you will likely need to file a motion with the court to obtain the court’s approval of the refinance before it takes place.
Since filing bankruptcy negatively affects your credit rating finding a lender who will lend to you may prove difficult. You’ll want to have a recent copy of your credit report and proof of your successful adherence to your Chapter 13 payment plan handy as you shop for a lender.
Once you have been approved for the refinance by your new lender, we will need to file a motion with the bankruptcy court in order to get the permission needed to take on the new debt. This is referred to as a “motion to incur debt”. This can take a month or two to get through the courts, but if it is approved, you will be able to proceed with your refinancing. In order to file the motion, my office will need to get copies of the loan paperwork showing the terms of the new loan, including the Good Faith Estimate provided under the Truth in Lending Act. That way, the judge can tell what the loan terms are that we are asking him to approve.
If you are doing a cash-out refinance, the court may require you to deposit the surplus loan proceeds with the bankruptcy trustee. This might allow you to finish your Chapter 13 bankruptcy early. Getting out of Chapter 13 bankruptcy early will help you save your credit score and put you back on the path to financial freedom. If you are thinking of refinancing, contact your bankruptcy lawyer and ask them if they think it’s a good idea and what your alternative options are first. This will help save you time and headache if you don’t qualify or taking on the new debt is not permitted.