Refinancing Your Mortgage While In Chapter 13

refinance mortgage during chapter 13You can refinance your mortgage during an active Chapter 13 bankruptcy case – but only if you follow the rules.

When you file for Chapter 13 bankruptcy, part of the deal is that you are not allowed to take on more debt until the case is over.

If you want to take on new debt while your case is active, you need court permission.

Some places relax the rules a bit. For example, for cases filed in the U.S. Bankruptcy Court for the Southern District of New York, you’re allowed to take on new debt up to $1,500 without asking the court.

When you refinance your mortgage, you’re taking on new debt.

Though you’re just swapping a new loan for an old one, it’s a new account and lender. That means it’s new debt.

You will need to follow the rules to make sure you don’t get into trouble.

Information And Documents We Need

You are going to need to get us some documents from your mortgage broker or lender.

You will also need to take the time to talk with someone in the office about the situation and circumstances surrounding the refinance.

The information required differs based on where you are – the court rules in Los Angeles differ, for example, from those in Brooklyn cases. And the requirements in Brooklyn cases are different from those in Manhattan.

That’s why you need to get in touch with us. No sense in getting the wrong information, only to have to go on a hunt for the right documents and lose valuable time later on.

Once We Have The Information In Hand

From there, we will need to file a motion with the bankruptcy court to allow you to refinance your mortgage.

This is called a Motion To Incur Debt in New York bankruptcy cases, and Debtor’s Motion For Authority To Refinance Real Property for Los Angeles bankruptcy cases  (you can click here for the official form we need to use in Los Angeles). Either way, it’s largely the same thing.

It takes a few days to put the papers together. Once filed, it will take about 3-4 weeks for the motion to be heard by the bankruptcy judge.

Once the judge hears the motion, and assuming nobody opposes it, we should receive an Order allowing you to refinance within a week or so. It could take longer depending on how busy the court is.

You are allowed to close on your refinance only after the judge has approved the motion.

When To Get In Touch With Us

Plan on dropping us a line when you get serious about refinancing. You don’t need to have a firm commitment from a lender, but give a call when you know for sure that you’re looking to refinance.

We’ll go through some basics, including the amount you’re borrowing, whether you’re looking to cash out some equity, and what we’ll need for your Motion To Incur New Debt.

Don’t wait until you’ve got a commitment because then you’re under a time crush to get to the closing table. Look at the timeframe for a motion to be heard and approved – do you really want to lose the refinance just because you sat on the sidelines?

Image credit:  RambergMediaImages

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