Refinancing Home while in Bankruptcy.
While in bankrutpcy, many Chapter 13 debtors will inquire about refinancing home. The Chapter 13 Trustee must be provided a copy of the refinance contract that list any cash proceeds to the debtor. If approved, the Chapter 13 Trustee will send approval letter to debtor via mail to provide to refinance co. for closing.
This inquiry from bankruptcy clients arises when the mortgage payments continues to increase per fixed rate or adjustable rate mortgage (ARM) loans. The general rule of most refinance companies is that the Chapter 13 debtor have at least 20% equity in the property. Most Texas Home equity loans are capped at 80% and some some lenders will require you to pay off your bankrupcy plan with any equity proceeds before they will approve loan.
In most cases, if you are unable to refinance your home then you may be able to contact your current mortage company’s loss mitigation division to discuss options of loan modification. A loan modification is a refinance of your current loan amount with your mortgage company. There is not approval required to get loan modification while in bankruptcy however a letter authorizing your mortgage company to speak with you may be required by your attorney’s office.
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