Can I Refinance My Home While I am a Debtor in Chapter 13 Bankruptcy?

by Dana Wilkinson, Attorney at Law

June 8, 2007

As unlikely as it may seem, it is possible to refinance your home while you are in Chapter 13. Like selling your home while in Chapter 13, refinancing your home while in Chapter 13 requires bankruptcy court approval, which takes time and planning. Most lenders who are willing to do such financing are familiar with the requirements, and will help you put together the information you will need. You will need to contact your attorney, provide her with information about your intentions, such as the amount you are borrowing, the interest rate, and the amount of monthly payments.

In many cases, the lender will want to pay off your remaining Chapter 13 obligation (i.e., the remaining payments due under your plan) and get you out of Chapter 13 in the process of refinancing your home. That will require obtaining information from the trustee as well. You will want to communicate with your attorney throughout this process, in order to expedite the gathering of information necessary to get the loan approved by the lender, and then by the bankruptcy court.

Whether you can qualify for refinancing will depend on several factors, including the amount of equity you have in your home, and how far into your Chapter 13 payment plan you are. Most lenders that I have dealt with want at least two years of solid payment history on your existing mortgage after you filed your bankruptcy. That is one of many reasons to meticulously make your mortgage payments on time while you are in Chapter 13. There are even some government-sponsored (or quasi-government sponsored) loan programs which may be available to you in the right circumstances.

Your bankruptcy attorney can help you get court approval of such financing, if it is in your best interest. Your attorney can also help you decide whether refinancing is the right decision for you.

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Däna (pronounced "Donna") Wilkinson, has been a bankruptcy lawyer in South Carolina for 20 years. She is certified as a bankruptcy specialist by the South Carolina Supreme Court.

Last modified: October 22, 2012