one more refinance question

[edward08r]

I've searched the threads, and can't find (doesn't mean it isn't there) anything related to this issue:

Does a person have to TOTALLY REFINANCE a home to do a chapt 13 payoff?? Anyone have any experience with approaching the trustee about a 2nd mortgage or a limited home equity line to accomplish the payoff?? Seems it would be substantially less in closing costs and total debt to go one of those other ways.

I really want to pay this thing off, but I have a decent interest rate on an FHA loan, and I am reluctant to lose the original mortgage unless necessary.

[13inOR]

That's a really good question. And feasibly, I don't know why it wouldn't be possible. It is still the same outcome, as long as the chapter 13 obligation is met, the trustee may even see it as a better solution if less interest and closing costs are paid.
The one problem may be that lenders just won't do a second mortgage when someone is in a chapter 13, because now that you mention it I have never seen that advertised as a possibility. So, that may be where you actually run into the snag, is finding a lender in the first place.
Our process was to find approval by a lender for our refi and then submit that with closing statement to the trustee for approval, so you could check around with potential lenders to see if anyone will do a second, and then check with trustee for approval if thats the route your decide to go.

[edward08r]

good point

That's a really good question. And feasibly, I don't know why it wouldn't be possible. It is still the same outcome, as long as the chapter 13 obligation is met, the trustee may even see it as a better solution if less interest and closing costs are paid.
The one problem may be that lenders just won't do a second mortgage when someone is in a chapter 13, because now that you mention it I have never seen that advertised as a possibility. So, that may be where you actually run into the snag, is finding a lender in the first place.
Our process was to find approval by a lender for our refi and then submit that with closing statement to the trustee for approval, so you could check around with potential lenders to see if anyone will do a second, and then check with trustee for approval if thats the route your decide to go.

good point, 13inOR. I have searched the web and there are "bad credit 2nd mortgage" places out there, also I have found a ton of places which offer "bad credit home equity loans"....but haven't researched any of them at this point. It is entirely possible "bad credit" does not include the severity of a chapt 13 in their eyes.....& the next issue is the horror stories one reads about some of these online lenders and all the hidden fees.

[Ch13experts]

Not likely to find a 2nd...

Hi Edward08r,
It is my experience that the only lender you may find who will have an interest in doing a 2nd while you are in Ch 13 is a Hard Money Lender. You can expect 3-8 points and at least 12% interest. I know of a company out here in Ca., that charges $15,000 regardless of the amount of your loan. You can see it is expensive no matter what.
I have yet to fina a lender who will not require the 13 be paid in full at time of funding. They don't want to be in a situation where you pay off your debts with their money and then still be in BK. It is a precarious position to be in for a lender who probably isn't even located in your state.
The good news is that you could probably qualify for another FHA loan right now. There is no FICO score requirement on FHA loans. You will need to deal with someone who knows their stuff but it is possible. Also, have you checked with your Trustee to see what the payoff is? This is a very important step to the process since it could be 100% of the origional bankruptcy or it could be significantly less. Shoot an email to me as I am in a network of lenders across the country that specialize in bankruptcy. Believe it or not, we actually exist. Not all of us are horrible people who prey on the innocent. Either way, good luck and God's speed.

Best wishes,