Can you choose 36 month payback & can people get mortgages during payback time?

[basketsbears]

Hi,

We are considering Ch 13 bankruptcy and I understand there is a 36 month payback plan and 60 month payback plan. Our attorney had said we would be 100% payback at approx $950 per month. Is it possible to pay more and have a 36 payback plan - or can the amount just be paid off in 36 months (or anytime sooner???)

Also, I have read different threads about people applying and being approved for mortgages - is that while they are still in the payback plan - or after? Are the rates horrible or decent? We are keeping our home, but at some point would like to get a different home after the unsecured debt gets paid down.

Last questions (for now) - do creditors look at 100% payback plans a little better than other payback plans or ch 7? I am still having a hard time accepting that we will be doing this as I filed Ch 7 in 1998 (after horrible divorce), had been listening to Dave Ramsey but with interest rates up to 30% on many of our CC - it is getting almost impossible to even meet the minimum payments.

Thanks for all the good answers - I am learning so much here.

[rrockinggramma]

according to your fico score a bk is a bk. However creditors do view a chapter 13 a little differently because you made an attempt to pay back. However having filed both chapter 7 and a chapter 13 the advantage I found was that in a chapter 13 I had to readjust my lifestyle and learn how to budget. Had that happened when I filed a chapter 7, then maybe I wouldn't have ended up in a chapter 13 (but who knows)

You could pay more and be done sooner but if I were you I would set up the plan for the 60 months at the lower amount and then wait and see who files claims and how much you end up paying back. In a 100 percent plan you can also pay in more if you wanted to to be done sooner but if your plan amount is set at the lower amount and then a month you have unplanned expenses, you won't jeopardize your plan by having a higher payment.

FHA will allow you to refinance while in a chapter 13 after a year of on time payments. However most will finance you the day after discharge in a chapter 13. In a chapter 7 there is a minimum 2 to 4 year waiting period. However to do it while in a chapter 13 you will need trustee permission to sell and then to buy which would be long and involved.

I would just wait until discharge. I was able to get approved 1 day after discharge with USDA guaranteed and closed May 8. (discharged March 4, 2009)

[basketsbears]

So one is not penalized by paying off the plan early?

Do you know if it is possible to get a decent rate on a mortgage while in Ch 13?

[rrockinggramma]

my rate was the going rate which was 5 percent

[rrockinggramma]

no penalty for early payoff in 100 percent payback plan

[oldhack]

The potential problem I see in consistently paying more than the minimum due, however, is that the trustee will increase your monthly payment (unless you're already in a 36-month/100% payback plan) -- because ALL of your disposable income is supposed to be going to creditors.
So, my guess is the trustee will demand a 36-month plan if you already have sufficient resources to pay 100% of debt in that time. Although the court won't approve a plan for less than 3 years, it won't keep you from ending it early once you've repaid 100%.

[klandsb]

[lrprn]

Is it possible to pay more and have a 36 payback plan - ...

No. The court structures the Ch 13 plan to be either 60 months or 36 months. The only filers that get to have a 13 plan that is 36 months are filers that are below the median income. Otherwise, it's a 60-month plan.

or can the amount just be paid off in 36 months (or anytime sooner???)

No. The 13 plan is structured using all your determined disposable income to be paid into the plan over 60 months (unless you are below the median income). Unless you are in a 100% payback plan (all creditors that file claims are paid back in full by the end of your plan), there's no advantage to paying more than your confirmed payment. The extra will just go to the creditors who filed claims. It won't shorten your plan even one day. Who wants to do that?

Also, I have read different threads about people applying and being approved for mortgages - is that while they are still in the payback plan - or after? Are the rates horrible or decent?

To take on new debt during a Ch 13, you need your trustee's prior permission to do so. Unless your house becomes unliveable (fire, etc) or needs very expensive repairs, you should count on keeping your house until your plan is successfully completed.

It's hard to find a mortgage during a Ch 13, and the rates will definitely not be favorable. You also run into the problem of what your trustee might do if you sell your home for more than it's worth. Trustees like to take easy cash.

Last questions (for now) - do creditors look at 100% payback plans a little better than other payback plans or ch 7?

Creditors do look at Ch 13 more kindly than Ch 7. However, it's very important to successfully complete the plan and be discharged. Creditors like seeing that you were able to make the payments over a long period of time and not "fall off the wagon".

Also some asset and other payments made during your Ch 13 *MIGHT* be reported to the credit bureaus - that can help raise your credit score at the end of your plan as well.

[basketsbears]

Thanks for all the great information. We are supposed to be 100% payback. I am in a way looking forward to just getting started with (now that I have come to terms with this decision) this and starting with our "debt-free" life in 5 years.