Refinancing to payoff my chapter 13

[13inOR]

Hello everyone, this is my first post. I wish I would have found this site sooner, its great! Here is our story: We have a 29 month 100% payback plan and our payments are $1302 a month. We are in month 18, so more than halfway done. Real estate in our town has SKYROCKETED and we have tons of equity in our home so we decided to refinance and pay this off. Since we are paying back 100% anyway, we are not losing anything at all by paying off early. Our debt load was not huge to begin with, under $30K, it was just that we were behind on the mortgages and needed something to hold them back till we got caught up. We have found a lender and spoken with our attorney who has advised us of what we still owe and what papers we need to submit for approval. My question is this: does anyone have experience with a trustee that actually said no in a refinance? I cannot imagine why he would, because we are paying off everything we would have anyway, just sooner. I just wondered if anyone knows what they go by. The interest is high (11.4)
but I plan to refi again at a low rate as soon as I have paid for 24 months on time. Thanks for any help you can offer!

[FilingOnMyOwn]

I didn't know you were allowed to pay off a 13 all at once. Seems like someone told me the payment plan must be followed as scheduled in separate payments.

[bkfiler]

you can always negotiate with a cash hungry trustee. they are there to make money. nothing else. if you can get your family to pay or have the money for some reason then you can pay it off and get it at a cheaper total too.

[Jman30]

I do have some experience with this. No Trustee will ever disapprove this - all they care about is making the money and if you are paying it all off at 100%, it is just one less case they have to worry about anway.

Beyond all that, I know that here in Ohio, we have a 36-month rule. If I try to refianance and pay off my Chapter 13 before the 36th payment, I will have to pay all the debt back in full at 100%. If I make my 36 payment and THEN try to refinance, I only have to pay back the debt at the 11% amount that I am paying right now in the Chapter 13.

So in my case, it is better for me to get to the 36th month and then refinance.

[13inOR]

Thanks for your responses. Yes, the 36 month rule would apply in Oregon too, IF we werent already paying back 100% in 29 months, that would make a difference. Thats why I figure he shouldnt care about this, hes getting the same money, only sooner, and we are out the same amount of money either way. thanks again!

[bkfiler]

i wasnt aware of this restriction. do you have any good links to it? thanks.

[bkfiler]

[bkfiler]

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. (typo?)

so this is a bit clearer. thats a shame. also, why are they saying you have to pay them $4000 again when you already paid for the 36 month? was it a typo? did they mean to say that after the 36 payments that you can buy out whats leftover had you kept paying?

i could have sworn i read where the debtor has offered to buy the plan out and it wasnt in cases where they owed 100% of the debt.

[13inOR]

I hope this answers your question bkfiler, but in a nutshell, how I understand it is this: If a debtor is on anything less than a 100% plan, they MUST pay at least 36 months or whatever the minimum is for their state, before the trustee
will release them. If they tried to pay off early, they would have to pay back the entire 100% even if they original plan did not have them doing so. They figure you need to pay the agreed amount for the agreed months and after
that you are done. As I said before, our case was different, we didnt have enough debt to last the whole 36 months and had enough income to pay off in 29 months.. So our paying off early makes no difference, but usually it would.

[bkfiler]

it seems to me in most cases to make sense. but if a family member wants to pay it off for you then why not take the cash payout. i thought they allowed that.

i guess if you get lucky enough to win the lotto they are going to take that one too eh? lol

[SinkingFast]

Just a personal opinion here,............ I wouldn't risk the equity in your house.

Been there, done that. The road to ruin is quite often paid with a refi of the home to get rid of other debt.

Refi appraisals tend be rather inflated. You can't predict the market as far as values go. As fast it's gone boom, something could prick the balloon, and your market could go bust. Also, you need a willing buyer and you never know if the right buyer will come along quickly if you need to sell.

Keep the equity in your home and finish making the payments as arranged.

Just my $0.02 worth.

[13inOR]

I think your advice is good, sinkingfast, and I see what you are saying for sure. We gave this a lot of consideration and since our home is very important to us (why we filed 13 in the first place, so as not to lose it in a 7)
we wouldnt want to risk it. Our reasons for doing so are basically this:
the amount of equity we are taking out is very small compared to what we actually have (we only owe about 13,000 on the bk and have $125K in equity)
so we are nowhere near maxing it out, and also we are in an area that has
had consistent upward property appreciation for years due to a very desirable part of the country.(central oregon) We bought this home in 1998
for 93K and appraisal was over $255 this last week, and it really is an accurate value because several just like it sold for 250 or 260 in the past month. Believe me, I know what you are saying, and I am a firm believer that taking out more debt is usually not the best way to handle things but we have given this quite a bit of consideration, I think your ideas are really valid, I just wanted everyone to know we did really think this through. My husband suffers from severe anxiety and I think not having this hanging over his head would also help him a lot. Thanks for your input!! We are all in this to help each other, thats for sure.

[SinkingFast]

Oh well,.......... With those kinda numbers,....... That kind of debt to equity ratio, I'd go for it.

Our refi appraisal was way over inflated. 4 years ago, the appraiser valued it at what it's worth today. Hubby lost job. Got new job in different state and we've had to move. We haven't been able to sell. We've dropped the price $25K and still no takers. And here we are. On a BK Forum learning about something we hoped we'd never have to do.

In your case, with that much equity, you don't have much to worry about. You won't get hurt by a market drop of $20K, $30K, even $50K. Better to get the tax deduction for the interest than pay interest and get nothing in the Ch 13.

[13inOR]

Just an update, our refinance seems to be progressing smoothly, no major issues with the trustee either. Closing date is tentatively 2/14, so we can pay this albatross of a chapter 13 off and buy a reliable used car (with cash, NO PAYMENT!) so I dont have to hold my breath that my old relic is going to get me to work each day. Looking forward to having only a house payment too, not a first, second, and $1302 payment to the trustee. whew..... what a relief that will be. Have a good weekend, all!

[SinkingFast]

Congrats, 13!!

I am soooooooooo jealous!!