Can You Refinance While in Chapter 13 Bankruptcy?
Most people are under the impression that you cannot refinance a mortgage while you are in Chapter 13 bankruptcy. In fact, you can refinance your home mortgage while in Chapter 13, but you must have permission and take care of a few more obstacles that may delay the process.
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Time
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Before you consider refinancing your home mortgage, you must have a good repayment history with the Chapter 13 trustee. You must have been paying on time for a minimum of six months. You must be making on time payments to your current mortgage as well.
Finding a Loan
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Before you discuss refinancing a mortgage with a lawyer and the trustee, you must find a lender that will work with a homeowner that is in a Chapter 13 bankruptcy. There are lenders that will offer you a refinancing option, but most lenders offer the subprime loan, which has a higher interest rate than what you might have now. It is rare to get the interest rate that people with good credit are getting.
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Lawyer
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After you decide to go through with the refinancing and have found a lender, you must talk to your bankruptcy attorney. You must convey your intentions and he or she will discuss this option with the Chapter 13 trustee.
Trustee
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The trustee is the only one that can allow you to refinance your current mortgage while you are still in a Chapter 13 repayment plan. The trustee will look at your payment history and petition the court to allow a refinancing or deny it. The trustee and the attorney do work together to make things as easy as possible for you even though you are in a Chapter 13 bankruptcy.
Rolling Over the Bankruptcy
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If you have enough equity in your home, you can refinance and add the remainder of the bankruptcy payments to the refinanced mortgage. The trustee must agree to this action before you or the lender can consider it. This would also make your mortgage payments higher and in some cases, because of the interest rate, you may be paying more than what you are paying at the time.
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