Refinancing for Chapter 13 Buyout

[Flamingo]

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.

Attorney's fees included in a Chapter 13 Plan are always a priority payment so they are paid first along with any other priority payments. No one will give you problems as to buying out because they all will get paid just as if you went to the end of your plan, but get paid sooner. The main thing is having enough equity to actually buy out so when your Trustee responds to you, make sure you comply with all instructions and requests. Note there is a Motion that has to be filed by the Trustee and the attorney jointly petitioning the BK Court to allow you to buy out and refinance. We were charged $400 attorneys fees for this Motion but our attorney included it on our refinancing settlement sheet.

[Sickofthe13]

im so excited I hope it works out!!!!

[holding on]

I only see references to old law and maybe 1 or 2 to new law. Is it at the 36 months that new law ch13's can buyout early? Reading other threads i thought it was great to get a FHA style refincanced mortgage after paying bk for 1 year until I realized that would mean more disposable income going to creditors. Probably better to wait those 36 months. I think i have that right.

[lrprn]

I only see references to old law and maybe 1 or 2 to new law. Is it at the 36 months that new law ch13's can buyout early?

The reason you don't see much about buying out of Ch 13 early under the current bk law is that no one at this point really knows how it's going to go.

The three year period for those filing under the current law will be reached for the first time this October 2008. For whatever reason, unlike the previous law the current bk law doesn't mention anything about early Ch 13 payouts, so each district will have to decide what their processes will be.

Due to this very poorly written law (authored by the big lenders and banks...no surprise), Ch 13 filers could end up with very different early payout options depending on which district they are located in. Worse, left with no instruction within the law each individual Ch 13 trustee could decide what he/she is willing to do with early payouts. There could be quite a mess until specific early payout bk court cases are filed and judicial decisions start coming out about this - stay tuned.

[bkdone]

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.

As exciting as it seems, please, please, please be patient in finding a new loan. I speak from experience in saying that mortgage companies will hear the desperation and excitement in your voice, and they WILL try to take advantage. We thought we'd only get offers for crappy loans with outrageous fees...to be expected we lemented...for goodness sake we are in bankruptcy.

Our mortgage company at the time was Countrywide and they had been very good to us up until that point. We'd been with them for 7 or 8 years. They made us feel so secure...'Yes,yes, yes...anything you need BKDone...we are here for you!' Naturally, I contacted them first and they were more than willing to patch me thru to their subprime part of the house...I'm no longer an 'A' paper loan. Fair enough, I figured. They kept insinuating that they were pulling off a miracle for us...getting us the best deal out there, since the chances of being approved with a smaller mortgage lender would be slim to none...blah, blah, blah.

Went thru the scenario...did the application...felt pretty confident...Glad Countrywide could help us. I use the term loosley...they tried to gouge the sh*t out of us.. The GFE come back and they wanted $8K in additional fees and points to add to the regular stuff. I didnt realize that was WAY over the top for a $152K loan. The Trustee objected... I was pissed since I thought I was home free (no pun intended) for my new mortgage. I was mad that the Trustee had the nerve to intervene and keep me from CH. 13 discharge freedom.

Well, the Trustee approved the refi, but only if we shopped for better terms. Long story short... I contacted my friend who works for a mortgage broker. I got about 5 offers from different companies, with fees that were less than half of what Countrywide wanted to charge me. When I got the GFE from the company that I chose, I sent it to Countrywide to see if they would match it. The loan officer at Countrywide was some guy named Adam. Adam said, and I quote..."We cant match that. If you can get those terms someplace else...go for it." We did.

We submitted the new GFE to the Trustee, which included $22K in additional cash, and the Trustee approved the refi. They never asked what the cash was for, never asked to see any estimates for any proposed work..nada. About 30 days later, I was paid off, and case went to final audit...discharged...done. BKdone...get it?

They say hindsight is 20/20. I now appreciate the Trustee for intervening...she saved us from ourselves and from wasting alot of hard earned money.

[Sickofthe13]

so all you did was write a one page letter to the trustee stating your intentions and that was it? I am afaid he will ask for paystubs and tax forms and make it a long drown out process. When I called the trustees office she said you have to write the letter and he will come back with his response. Did you use your attorney? Quite frankly mine sucks. No replies to questions, office staff knows nothing. I just want to get this process moving, not out of desperation, because we can handle the payments fine, just ready for the next step. You see, we asked permission last summer for a new car and since we had a balance on the the one in our bankruptcy, he wanted some more info. Well, we changed our minds, didnt persue it, but since we didnt know he was waiting for a response he filed a motion to dismiss and convert to chap 7. well we didnt want that. had to show new earnings and our payment DOUBLED and he added 4k to our total hense adding more time as well.
Just ready to be home free.

[Flamingo]

so all you did was write a one page letter to the trustee stating your intentions and that was it? I am afaid he will ask for paystubs and tax forms and make it a long drown out process. When I called the trustees office she said you have to write the letter and he will come back with his response. Did you use your attorney? Quite frankly mine sucks. No replies to questions, office staff knows nothing. I just want to get this process moving, not out of desperation, because we can handle the payments fine, just ready for the next step. You see, we asked permission last summer for a new car and since we had a balance on the the one in our bankruptcy, he wanted some more info. Well, we changed our minds, didnt persue it, but since we didnt know he was waiting for a response he filed a motion to dismiss and convert to chap 7. well we didnt want that. had to show new earnings and our payment DOUBLED and he added 4k to our total hense adding more time as well.
Just ready to be home free.

I understand your excitement about out and I totally agree with the poster prior to your posting above. However, there are certain steps involved in all this that take time and effort. When one wants to see if they can buy out of their plan (please note this is OLD law as it went down for us), they contact their attorney who will advise them what needs to be done and what documents need to be provided to the attorney so the attorney can consult with the Trustee. The attorney advised us to get mortgage approval and submit certain paperwork to him for approval. We obtained approval through a place that offered us an adjustable rate mortgage; when the attorney saw that he referred us to a broker he utilized in the past for clients. He said not to accept the first offer. It was bad. During that time we had to obtain an appraisal on the house for it's value. We contacted the second broker who got us an FHA fixed rate mortgage for 30 years. We wanted to buy out of our plan and get a new roof installed with new guttering and downspouts and a new front window which was bad and cracking. All that right there was in excess of $13,000. We had a lot of equity and had no problem and we only owed $30,000 total on our first and second mortgages. We refinanced only for 1/2 of what our house was worth and that paid off our plan and we did the house repairs. By the time we got this approval, the appraisal and submitted the necessary paperwork to the attorney and the attorney and trustee filed the Motion for us to buy out and refinance, six months passed from our initial broker contact with the first company to the time we signed the settlement papers. I hope you are not in a hurry. Our time was probably more that most due to two major holidays occuring during that period of time with lots of court personnel on vacation and court closings.

This is not a quick process, can be complicated and can take some time. It will require a LOT of work and paper shuffling. Nothing happens overnight with a Chapter 13.

[bkdone]

I agree with Flamingo. Things can take awhile. Honestly...as I sit here and try to think back, we applied in May and the final payment was disbursed at the end of July...discharge was not until early September. For us, the hold up was the Trustee declining our first loan offer and making us shop for another one. Each loan and each person's experiences will be different, but I can honestly say it didnt take that long... And, by the way...the attorney charged us $300 which was paid out of the loan proceeds.

When you write your letter, send it to your lawyer and another copy directly to the Trustee's office. I think that mine went smoothly simply because I didnt wait for the attorney to 'get back to me.' They were nice and everything, but not the most attentive or accessible people either.

[Sickofthe13]

Update!!

So last thursday I sent a letter to the trustee about our request for the refi. I just got a letter today stating we have the permission as long as the funds from the refi pay off the chap 13 plan. And if we need any other info to contact our attorney. Do we need to file a motion now to pay off thru the court?

I am so happy