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Selling House in Chapter 13

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    Selling House in Chapter 13

    I will of course discuss this with my lawyer since we need to get permission to sell but wanted to see if anyone had experience.

    We are currently 26 months into a 60 month chapter 13. No issues thus far. I am in the Western PA district and our trustee requires all debt to be paid through chapter 13. Our mortgage payment is included obviously. We had no arrears going into the chapter 13 plan. We are planning to move from PA to Texas this summer and will need to sell the house. We will not make much, if any profit and the amount we do make should be covered by the homestead exemption.

    My question is with regards to our chapter 13 payment.... our monthly payment is $4454. $2411 of that is our mortgage payment. We would like to buy a new house once we move and I realize that we would need to do an FHA loan. Will we need to completely redo our plan to reduce our monthly payment to the trustee once our house sells? Or can we just petition to reduce the monthly payment by $2411 once the house sells. I would assume a new mortgage that is obtained AFTER filing would not be included in the plan since it is considered a post-petition debt? I know we would not be allowed to have any mortgage payment higher than that since it would affect the small amount going to our unsecured creditors.

    Some ancillary info... our confirmation order does not require us to report any increase in income or turn in tax returns.

    Thanks!

    #2
    Mmwhite022 while I can not really answer your questions, I find your post quite interesting and wonder why the BK13 gurus haven't yet replied to you.
    It sounds like you have a job lined up in Texas. Hopefully the new company is offering relocation assistance. If not you may have an uphill battle getting the trustee to allow you any funds to pay for your move. Our mortgage payment is like yours , very steep($2300+) and while we would love to leave Colorado behind before our remaining 3 year term in BK13 ends, we thought even with a job offer or transfer ,it just wasn't feasible financially. I thought the trustee could seize your home sale profit as the dreaded "disposable income" unless you already have a home picked out for your down payment. I don't believe you are allowed to keep any proceeds from your home sale. One thing we have wondered about when my husband was laid off in early January (before he got a job offer later that month). If for some reason you couldn't sell, would the trustee allow you to rent your home out in order to keep paying the mortgage as long as you didn't get any excess money after the rental management company collected their fees? And could you rent in Texas until your Bk13 was done? I am curious what is allowed in BK13 when you relocate out of state (in case my husband would get a wonderful job transfer offer with relocation funds to a better, more reasonable place to live. {Not going to happen. Just a funny fantasy on my part LOL! } Colorado is ranked the 7th most expensive state to live in the USA for 2019!)
    Good luck with your move and keep us posted how your trustee responds!
    Last edited by Barbisi; 03-25-2019, 04:18 PM.

    Comment


      #3
      Originally posted by Mmwhite022 View Post
      Will we need to completely redo our plan to reduce our monthly payment to the trustee once our house sells? Or can we just petition to reduce the monthly payment by $2411 once the house sells. I would assume a new mortgage that is obtained AFTER filing would not be included in the plan since it is considered a post-petition debt? I know we would not be allowed to have any mortgage payment higher than that since it would affect the small amount going to our unsecured creditors.
      I thought I answered this in another thread, but here it goes again.

      Almost anytime there are major financial changes in a Plan, this will likely trigger both a Motion to Modify Confirmed Plan and a review of Schedule I/J and/or the Means Test. The new mortgage wouldn't be included in the plan, but the plan must be redone in order to deal with the claim from the prior home (and mortgage). You don't want the Trustee to keep paying bank A when you sold that home and bought something with bank B?

      Your biggest issues, frankly, are not with the Trustee, but with finding a mortgage company without overlays and that will do manual underwriting (since you are in an active Chapter 13). There's absolutely nothing in the FHA rules that prevent such a loan, it's just that not all banks want to do manual underwriting. The issues with the plan modification and cleaning up Schedule I/J and Means Test are insignificant, comparatively.

      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog


      I am not an attorney. Any advice provided is not legal advice.

      Comment


        #4
        We are relocating to Texas this year, too. Actually, my husband is already there, having transferred locations with his job. We are waiting until our case is closed (some time this summer) to sell our house so that we don't have to mess with the legal hassle. I know that's not an option in your case. There are plenty of lenders in Texas who do manual underwriting. They even have agents who specialize in bankruptcy loans. I've spoken to several lenders (Caliber Homes off the top of my head) and they've been more than helpful (that's Texas for you!).
        Chapter 13 - May 2014
        Broke but not broken...

        Comment


          #5
          Everything is bigger in Texas. That's probably why it's easier to find lenders (and/or brokers) that understand how to do FHA loans in an active Chapter 13!
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment

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