Are You In A Chapter 13 Bankruptcy And Considering Refinancing Your Home, Consider The Following:
Angela - March 1, 2005

CHAPTER 13 OVERVIEW:

Chapter 13 is a reorganization plan for individuals who are seeking to reorganize their debts. Normally under Chapter 13 reorganization, a debtor will make payments under the guidance of the court for a required three to five years. Sometimes, a debtor who has filed a Chapter 13 bankruptcy can utilize the equity in his home to payoff his creditors early (before the last payment due under the plan), and may even be able to "buy out" the plan, or pay all of his creditors early and receive a discharge. You'll find below some general information regarding refinancing and your chapter 13. A Chapter 13 lasts from 3 years (36 mos.) to 5 years (60 mos). During that time you make only one payment each month on a date assigned by the Court. Your payment is sent to the Trustee who in turn pays your creditors Trustee.

CAN I REFINANCE MY MORTGAGE WHILE I AM IN CHAPTER 13 BANKRUPTCY?

Most Debtors are under the misguided notion that once you have filed a Chapter 13 Bankruptcy case, there is nothing else you can do regarding getting a lower interest rate on your existing mortgage or getting out of the Chapter 13 case early.

DON'T BE FOOLED BY THIS MISGUIDED NOTION

After you have been in a Chapter 13 case for at least twelve (12) consecutive months (this differs by Lenders) and have made your plan payments to the Trustee on time, you MAY be eligible to refinance your mortgage to get a lower interest rate or even refinance yourself completely out of your Chapter 13 case.

You are allowed to refinance your mortgage as long as you are not receiving any funds at the closing. You may first have to obtain consent from your Trustee and send a good faith estimate. The approval process MAY be different based on the jurisdiction where your case is handled.

HOW CAN I USE THE REFINANCE PROCESS TO MAKE MY PLAN PAYMENTS LOWER?

If you are able to refinance your mortgage to get a lower interest rate, this MAY make your month mortgage payment lower, thereby causing your plan payment to decrease.

If you are thinking about going this route, pay attention to whether your decreased monthly mortgage payment will create a substantial increase in your disposable income. If by lowering your monthly mortgage payment you increase your monthly disposal income and have a substantial amount of unsecured debt for which you are not paying 100% your plan payment MAY not decrease, it MAY stay the same or increase.

HOW CAN I USE THE REFINANCING PROCESS TO BUYOUT OF MY CHAPTER 13 BANKRUPTCY?

If you are considering buyout (getting out early) of your Chapter 13 case, you MUST first determine how much you owe to general unsecured creditors. WHY, YOU MIGHT ASK?

Well, if you buyout of your plan too early (generally before making 36 consecutive payments) you may have to repay 100% to your general unsecured creditors. On the other hand, if wait until after you have made 36 consecutive payments, when you buyout of the case, you are only required to pay the general unsecured creditors what you would have paid them throughout the life of the plan.

NOTE:

THE FOLLOWING EXAMPLE REFLECTS A DEBTOR IN A 40-60 MONTH PLAN.

EXAMPLE:

Let's say you owe 40,000 in general unsecured debt, but based on your plan you are only required to pay $4,000 to your general unsecured creditors based on your non-exempt assets and your disposal income.

BUYOUT:

(after making 34 payments): if you try to buyout now, you will pay your general unsecured creditors the 40,000 you owed them when you first started out.

BUYOUT:

(after making 36 payments): if you buyout now, you are only required to pay your general unsecured creditors $4,000.

NOTE:

The rate and/or ability to refinance will largely depend on the following factors:

1. Your current credit score.
2. The value of your new loan to the value of your home (this includes the payoff of your existing mortgage, your current debts and the cost to refinance).

If You Are Seriously Considering Refinancing Your Mortgage, Contact:

Weller Lending Company
Phone: 727-539-0360

Julian Credit Management is a firm that practices exclusively in the area of Bankruptcy and Debt Consolidation and has offices in Clearwater (Pinellas County), Port Richey (Pasco County), Tampa (Hillsborough County), Lakeland (Polk County) and Orlando (Orange County). We represent persons throughout the State of Florida.

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