refinance 1 month before filing bk

[familyof7]

is it considered bk fraud if you refinance 1 month before filing bankrupcy and get some cash out like 5000.00 it was put right back in the home repairs you see we lived here like 6 months before we financed it was a lease purchase but because we lived here for 6 months prior they did it as a refi so we could go by the value of the home and get cash back

[familyof7]

because that is a issue someone pointed out to me

[lrprn]

is it considered bk fraud if you refinance 1 month before filing bankrupcy and get some cash out like 5000.00 it was put right back in the home repairs you see we lived here like 6 months before we financed it was a lease purchase but because we lived here for 6 months prior they did it as a refi so we could go by the value of the home and get cash back

I re-read your post several times but still don't understand the connection between your lease purchase and the refinance. Can you explain that in more detail? And how much cash total did you get from the refinance?

[familyof7]

We moved into the home on 8-2006 as a lease purchase and in march of 07 we went to the bank to get financing to buy the home usually when you buy a home they ask for say 10% down they go by the sale price of the home not the value but since we lived there for 6 months they financed the home as a refinance since we were lease purchasing the home we were technically buying it already even though the deed was not in our name we had a contract to buy the home so to sum it up the loan was done as a refinance so they loaned us 75% of the value of the home not the sale price so after satisfying the sale price of the home and closing cost insurance and all we got about 5000 dollars cash out and filed bk shortly after like 30 days or something is that a problem yes we did get cash out and yes it was considered a refinance but it was really a purchase because technically the home was not in our name until then and the cash out went to some repairs for the home and vehicle

[lrprn]

One request - could you please use periods at the end of your sentences when you post so we can see where sentences begin and end? (Capital letters at the start of a sentence would be nice too.) It's really hard to sort out what your posts mean when they are lots of individual words strung together one after another without a break - thanks!

If I broke your sentences apart right, you borrowed the value of the home you were renting to own and even though you didn't have the title, the lender loaned you the money as if you did so you could purchase the home. You then spent the $5K left over to make repairs on the house and your car. Did I get that right?

This is a complicated transaction - I don't know whether this could be considered potentially fraudulent when you file. My guess is that since you haven't filed yet and used the money for legitimate purposes to improve assets, you may squeak by with it. But you really need advice from an experienced local bk lawyer who has some understanding of how the trustees in your district may see this kind of transaction.

[familyof7]

We moved into the home in 08-07 as a lease purchase with the agreement that within 6 month we would get our own financing .We officially bought the home 3-07. The loan we got to buy the home was labeled as a refinance. Being that it was labeled as refinance not purchase we got cash back 5000.00 and we filed bankruptcy chapter 7 one month after that. The reason we were able to obtain the loan as a refinance was because we had a lease purchase agreement and we lived there for 6 months. The benefit of obtaining the loan as a refinance vs. a purchase is that they were able to loan based on the value of the home not the purchase price. The purchase price was less than value so we got cash out instead of having to pay a down pmt. My concern or question is , is it considered fraud or does it raise a red flag being that it was done 1 month prior to filing bk?

[freshstart06]

From what I understand, you can refi if you intend on keeping the home. I am a Mortgage broker so I totally understand about converting a lease option in to a purchase, we do those all the time. YOu may want to sign up with a Prepaid legal service. They have bk lawyers on hand to help with question like that. Just be careful because the cashout is another assets or something like that. Prepaid legal is only $19 a month and they answer all questions, they just can't do the BK forms for you. they have been a great help to me.

[freshstart06]

Oh, by the way, even though you consider it a purchase it really is a refi in legal terms. Trust I have done my share of lease purchase refi. You already had your meeting correct and if they did not ask about it don't worry about it. Try to only worry only when you have to LOL. Pray and let that one go.

[keepmine]

I don't see this as a problem since you used the money for upkeep of a secured asset.
In fact, back in the good ole days prior to bk reform {when lawyers could recommend taking on more debt prior to filing} this was refered to as a tactical bk. Say, you had a $10K more equity than your state allowed. They'd suggest a heloc or cash out refi for the amount in question and then use the money for repairs, replace the HCV, replace carpets, new appliances,etc. A good way to file a Chapter 7 and keep your house. Of course, you needed to be able to afford to make the payments on the note{s}.

[familyof7]

No it has not came up, but since we had a house fire and so many up front expenses we are not able to pay our mortgage until insurence reimburses us. The trustee is holding that process up .We got an attorney he is going to request an emergency hering so the insurance money is released .If we dont pay our moetgage by the 6th of july they are going to request permission to foreclose from th bk court. I cant pay it until the insurance money is released they are going to reimburse us for all of the out of pocket expenses it is just a matter of the bk court releasing it. So i guess we are stuck between a rock and a hard place. I am just worried that if is gets foreclosed on that it would look suspicious being that we received cash out 1 month before bk filing.

[freshstart06]

Well, if you foreclose because they are holding up the insurance money then it does not look suspicious, however, if you are late because you can't handle the payments before the fire and you got the cashout then that may raise a red flag (just asked my lawyer friend for you)

You have to look at it like this, you got $6000 cashout before filing, then you home catches on fire, then you get insurance money, but you are about to foreclose if you are late... If someone looks to deeply there may be a problem. This is coming from my lawyer friend.

I don't know, I learned the hard way sometimes being honest or keeping the communication lines open just don't always pay. I would have just had my insurance pay the contractors to fix my home, if no money was to come pass your hands then you not accountable for it. YOu have to have a home the if functionable especially with kids. The red flag comes up when the money is given to you.

Even though you are telling the truth there are so many scams out there and for this reason we have the new law and trustee looking too deep. Thankfully, you already had your meeting but now they may look at the file again.

It is too bad you had to take care fo the expense yourself because you could have used your money to pay the mortgage and waited on the insurance to fix up the home.

Pray, and sit back and wait, the solution will come to you. Trust me!!!! Do not think negative because you calling it into existance. Remember in my post last week, I prayed to God and asked him where is the money going to come from to move (this is before my landlord gave back the money but was talking crazy stage) Well, I woke up the next day and I had enough money to move, feed my kids, pay some bills, etc. Then I prayed for God to give us an ideal home for the right price and the landlord waives the security deposit and not care about credit. Well we are in the process of moving into a 3400sq foot home that is cheaper then the home we are in and we did not have to pay security deposit up front nor did he care about credit. This all happen at the 12 o'clock hour.

So pray and it will work out, I am so far proof (smile)

[familyof7]

Yeah I know I need not loose faith. The insurance would not go to me except they have to reimburse me for out of pocket expenses food clothes etc. things we need and would normally already have if it were not for the fire plus they have to pay me to replace my personal belongings that were lost so all of this is just to put me back where I was before the fire not make a profit we have spent our moertgage and light bill money just to feed and cloth our kids but we were told we will be paid back so I thought no big deal save my receipts but this is crazy. You are right being upfront and honest doesnt always pay off. The structural damage can go to us or any contractor to fix the structure but personal belongings and reimbursments are one check to go to us structural damage is a second check usually has mortgage company and home owner name on it and then at that point we pay some one to fix our home or fix it ourself.

[familyof7]

one more question freshstart06 ,

If we let our hhome go back after discharge and close will that be grounds to re-open the case? Just a thought

[freshstart06]

familyof7, you know I am new to this as well, I don't want to give you the wrong answers. However, Please don't give more info then what is asked of you, if they don't ask do give. You situation can create a red flag so the last thing you need to do is offer info, you already flew throught the 347 meeting so let everything else rest or you will find yourself in a deeper hole. To bad you did not look into organization that helps people when their house catches on fire with household expense ie red cross. This would have saved a lot of money. Right now is not the time to be making changes ie as letting your house go, do what ever you can to keep it. Honestly, look at it from a trustee stand point
1. you get cashout refi
2. you file chapter 7
3. your house catches on fire
4. you can get insurance money in your pocket as well as fix damages
5. you want to let your home go

Please hold tight, don't do anything else, when the money is released just pay the mortgage, don't give up/ Just be careful in what else happens you came too far for you case to be dismissed.

[familyof7]

Thankyou freshstart06,
I am not going to do anything else just pay my mortgage and fix the home. The red cross can only pay for motel stay for 3 days after that the insurance company or we are responsiable it has already been 6 days. The red cross did give us some supplies but very little I am thankful but it was not enough. I am thinking "after" bankruptcy that we will try to sale but if we cant ,we might let it go back ,But not until the case is discharged and dismissed.

My only other question is if we let it go after bk (we did not re-affirm )will that be grounds to re open the case? If we do let it go after bk how long is the minimum should we wait?