Refinancing for Chapter 13 Buyout

[Sickofthe13]

I am at payment 36 out of 60 old law. If anybody has refinanced to buyout, who did you go thru? DO we get the financing first than request it to the trustee? My lawyer sucks and never calls back. His staff is even worse. They figure, oh you filed in 2005, your done. We just need to get out of this and move on.

Thanks for your input.

[bkdone]

Yes, I did in July of 2006. Check out my posts from that time. Another poster and I did it at the same time...lots of info there.

[HHM]

You need to get the buyout from the trustee then go get financing. (getting buy out from the trustee takes the longest).

[MajorMike]

Why would someone want to buyout early? It's not like you're saving money. In fact, you're going to pay interest on the buyout to the mortgage company. I don't understand that.
It will still stay on your credit report for 7 years and doesn't affect that.

[Flamingo]

We did an early buy out of our 5 year chapter 13 plan in April 2006 - many of my past postings have that information. MajorMike has a good question as to why someone would want to buy out early. As in our case, we had major house repairs that had to take place soon and just could not wait. We refinanced to get the money for a new roof and a few other major repairs. Our plan was due to be finished in April 2007 and we would not get our discharge until at least 3 months after that and there was no way our roof would have lasted. We refinanced for only the payoff amount of our Chapter 13, enough for the house repairs and the payoff of our first and second mortgages together was only $30,000 (we had a lot of equity and 4 years of paying on those mortgages during our 13).

To refinance you first must have enough equity in your house to payoff your Chapter 13. You will need to provide that proof to your Trustee. Your first step is to contact your attorney who will instruct you what to do. You will need to get an appraisal and find a broker to help you with financing and approval. Your attorney is a marvelous source for that broker (ours was). The entire process takes a while and if all goes through, the attorney and Trustee together file a Motion to the Court to allow you to refinance and buy out of your Plan. Then you can go forward with the final settlement.

[MajorMike]

Thanks Flamingo!

[Sickofthe13]

well we want to do the buyout because the van that is in the plan costs us more and more in repairs, our furnace is in need of replacing and I would rather have interest to write off the 13 vs month by month dragging on by. We got BAD information while filing. We were not losing our house, the atty said, well the 13 will loswer ur payments on the van and it will be paid off sooner. We get to court and its all this added money for him and some credit cards. We pay our house seperately. Chap 13 has been a HUGE regret.

[Flamingo]

If you wanted to keep your house, Chapter 13 should not have been a regret. That is why you have all the payments you do and the amount of the payments. Since you are old law and past the 36 month mark, call your attorney and get the ball rolling. Refinancing and buying out during a Chapter 13 takes time and is sounds like you are in a rush. It took us six months from the time of making the first attorney contact as to what we should do to the date of settlement. Attorneys are busy now with the increase in bankruptcy filings and lenders are swamped with foreclosures. Take your time, do your homework and be thankful you were able to keep your house and get as far as you did in the plan.

[bkdone]

Why would someone want to buyout early? It's not like you're saving money. In fact, you're going to pay interest on the buyout to the mortgage company. I don't understand that.
It will still stay on your credit report for 7 years and doesn't affect that.

The nirvana that comes from finally being out from all the collector's phone calls and nights lying awake wears off after awhile. You will come to see that somewhere after a year or 2 of making those plan payments is tiresome. We got tired of not having money to cover new tires, home repairs, and unexpected things. If a sewer line breaks and its gonna cost $1200, there is no credit card or extra pay to pull from.

5 years is a long time to stay on the plan... its a long road and while many have done it, we are glad that we refinanced. And the sooner you are discharged, the sooner you can get back on track and get some distance between you and the BK. Granted, it stays on your credit report for 7 years, but after 2 years from the date of discharge, most creditors are more willing to work with you; the rates are better too. Had we not paid out early, our plan would not have ended untill April 2009, then we'd have had to rebuild credit for 2 years, which would have put us at 2011...the same time our BK would have fallen off our reports anyhow. Why not pay out early and get out from under BK sooner?

Yes, you pay interest on the money in a refinance, but its all tax deductable. Early pay off isnt for everyone, but our plan payments were $1000 per month! I'm glad to not have to pay that anymore, in addition to our mortgage. We felt good that we didnt just walk away from out debts, and we came out of this with our cars paid off and some cash to do some maintenence repairs on our house. For us, it was a good option.

[Sickofthe13]

what information did the trustee want to know when you refinanced? Did they want a detailed information packet or just the ammount of the new mortgage plan?

[Flamingo]

what information did the trustee want to know when you refinanced? Did they want a detailed information packet or just the ammount of the new mortgage plan?

You will have to ensure you have enough equity in your house to refinance to pay off your Plan. If there are household repairs that need to take place, you will need an estimate of the cost of those repairs if you are refinancing to pay off the plan and get funds for the repairs. Your attorney (contact him/her first) will instruct you as to what to do. You should be advised to contact a broker, get an appraisal and seek approval on a mortgage. The attorney will want the Truth in Lending paperwork, appraisal and maybe other documentation. Ask your attorney for a broker referral who has worked with other BKs. He/she should have a name on hand of someone who has worked with his other clients in buyouts and refinancings.

[bkdone]

We contacted our attorney and mailed them a letter stating that we wante to refinance. In the letter we said we wanted to do some household maintenence and repairs, but we never had to provide any estimates, or specifically state exactly what things would be done. Once we got the preliminary okay, the Trustee wanted to see the Good Faith Estimate from the mortgage lender.

We contacted Countrywide first, since they were already our mortgage company. The trustee felt the loan orignination costs for Countrywide ($8K) were way too high, and made us go back and shop around for another loan. We went thru a broker and had about 5 options to choose from.

We got a much cheaper loan thru another company and proceeded with the deal. When the refi went thru, we paid off our BK $35K, and took out $22K in cash for repairs and whatever else we needed/wanted to do. It was a pretty simple procedure, but it just takes time. I think it was about 2 months, start to finish...maybe 3.

[Sickofthe13]

what documentation did the trustee need? any payroll stubs or tax forms? Thats what I am nervous about most. We already had an increase due to our income increasing and I dont want to draw any attention to myself other than hey, we need to go from a 9.75% mortgage to lower.

[bkdone]

The trustee will want to know what your plan is and what you want the money for...hence the letter explaining all of that. Nothing overly detailed...one page...'We'd like to refinance to pay off our Ch. 13 and do some repairs on our house. The repairs are for general maintenence and to fix our air conditioner...etc' Then, once they approve and tell you that you can do it, they will want to see the GFE.

In our case, we never had to show the refinance application or any stubs to the trustee. All they wanted to see was the letter of our intentions for the money, and the GFE. Once we got the money from the refinance...$22K, they never asked to see proof of what we spent it on. The Ch. 13 was paid off directly from the proceeds of the refi, and they were done as far as we were concerned. About 30 days later, once all of the final payment was distributed...final tally done, case was completed, closed, and final audit done. Discharge was about 2 weeks after that.

[Sickofthe13]

Update

so today i called the trustee and they said we just need to write the trustee a letter stating out intention. So I emailed my attorney and advised him on our intention to refi so we shall see what he says. The first 8 mos of our payments were paid to him for his additional "fees" so I cant imagine him crying to the fact we want out of this, he isnt due anymore money.