The notion of filing for Chapter 13 bankruptcy is a rough pill to swallow for a lot of homeowners. Countless attorneys fall short to tell their debtors that they have choices clear of filing a BK 13. For many, the Chapter 13 is the best option because it provides a fresh start and freezes interest and penalties. Debtors that have determined the Bankruptcy status is appropriate, can refinance their mortgage after 36 months and are not required to pay any unsecured debts. 95% of the time this is the best option for the debtor. Under BK law, the unsecured debt is washed on a BK 13 in the same way unsecured debt is washed under a BK 7. Debtors that can pass the means test can simply refi their mortgage under a foreclosure bailout program and file a Chapter 7 without ever needing to file a 13 and payback the unsecured portion. Many borrowers and attorney are simply unaware of the programs that exist.
Typically a foreclosure bailout will go to 65-70% LTV (loan to value). With the new laws enacted in October, many attorneys have been encouraging their clients buyout their debt. The way the process works under a tradition Chapter 13 Refinance would be as follows: My credit rehab programs is started with a 2/28 Arm that will pay off the existing mortgage and the items rolled into the bankruptcy. My program will lower the debts monthly payment and discharge their bankruptcy upon funding. Many times borrowers are able to take cash out of their home up to 90% LTV. The higher ltv will require a 0×30 rating on the trustees report (12 month history) and a 0×30 rating on their mortgage (12 month history). 80% LTV is allowed up to 2×60 on the mortgage/trustee payment history. There is no limitation on document types. Loans can be stated income stated asset or Fully documented. Obviously the interest rates will be more favorable by documenting income but is not required.
After 2 years of timely payments to your mortgage the 2/28 ARM can be refinanced to a lower 30 fixed if a fixed is desired. Being dismissed from a BK is precarious situation to be in. However, there are many banks that will allow a mortgage to be protected even if the debtor has been dismissed. As previously discussed, a dismissed BK debtor has the same options available as the debtor that never file a 13. The premise is to protect that mortgage and anything that would affect title to the property. Usually the open unsecured debts can be paid as well. It’s very important when refinancing your Chapter 13 that you use a chapter 13 specialist. Chapter 13 buyout is not like a traditional refinance. Many brokers are unfamiliar and inexperienced with Bankruptcy law and the process varies from state to state. i.e Pennsylvania does not require a motion to be filed with the court to get an approval to refinance a BK 13. Across the bridge its neighbor New Jersey does require a motion and the process takes much longer. Work with a mortgage professional who knows the attorneys and the trustees.
You may contact the author @
Shawn M Peck
Chapter 13/Foreclosure specialist
Brink Mortgage LLC
306 W Cuthbert Blvd
Westmont NJ 08108
856-858-1176 ext 108 PH
856-858-3077 fax
www.mybrink.com
Shawn M Peck has many years experience in the Foreclosure process and Chapter 13 bankruptcy.
Mr. Peck is a Rowan University Alumni and works exclusively in the Foreclosure and Bankruptcy field.
Mr. Peck has helped 1000’s of homeowners get back on their feet and holds lifelong relationships with area bankruptcy attorneys and their clients. Mr Peck is a member of The PAMB (Pennsylvania Association Of Mortgage Brokers) and is sworn to uphold their ethical code of conduct. Mr. Peck resides in Cherry Hill with his wife Elizabeth and his dog agustus.
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