How to Refinance a Home During Chapter 13 Bankruptcy

Debtors who have confirmed Chapter 13 bankruptcy plans do have the option to refinance their home. It is more complicated for them than for a person who hasn't filed for bankruptcy, but the option is there if needed. With the help of an attorney, debtors can refinance their home with the approval of their trustee.

Instructions

1. See the bankruptcy attorney. The bankruptcy attorney handling the Chapter 13 case can give the best advice as to what options are available and how to proceed.

2. Find a mortgage company that will refinance the home. Finding creditors that deal with debtors who have filed for bankruptcy is possibly the most difficult part of refinancing a home while in Chapter 13 bankruptcy. Creditors are leery of taking on the risk of these debtors, since often they end up converting their plans to a Chapter 7 bankruptcy, and they lose money on them.

3. Put together a new budget plan. This is done with the attorney. The budget plan will have to reflect the change in the cost of housing that will occur after the refinance. Keep in mind that even if the trustee rejects the refinance, an increase in plan payments may be required if reported income increases.

4. File a motion in bankruptcy court. This involves a filing fee due to the court. Contact the bankruptcy attorney to find out the cost of filing a motion. Usually this cost is added to the plan and paid out through the bankruptcy.

5. Get the trustee's approval. The trustee will review the budget plan, and a trip to court will be necessary. Any costs incurred due to the refinance will be questioned, and how the debtor will pay for them will be addressed. These costs are not eligible to be added to the plan, so they must come from gifts, tax refunds or something of that nature.