Buying A House In Chapter 13
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The requirements to buy a house during or after Chapter 13 depend on the type of mortgage you hope to use. Government-backed loans are more lenient about Chapter 13 on your credit report, while conforming loans (backed by Fannie Mae and Freddie Mac) impose longer waiting periods.
While in a Chapter 13 bankruptcy, you must get permission from the bankruptcy Trustee to incur any new debt. This includes a mortgage if you want to purchase a new house. When you are serious about buying a new home within a Chapter 13 bankruptcy, you should let your bankruptcy lawyer know. They will get in contact with the Trustee for you and let him or her know that you would like permission to incur debt. They will file a motion with the court for this. Once the trustee makes a decision, the attorney will let you know.
Also beware that many people have to have a decent amount of money up front for the purchase of a house. That may be for a down payment on the home or for closing costs. The bankruptcy courts are going to want to know where you came up with that money. If you have been able to save that amount over time then they may feel the need to increase your monthly Chapter 13 payments. Most of our clients get the money from the support of family.
If you are interested in getting a new house while in a Chapter 13 bankruptcy you need to contact your bankruptcy lawyer. They will help guide you through the process and will be able to let you know whether they think the bankruptcy judge will approve your Motion to Incur Debt so you can get the financing necessary to purchase the home.
After filing for Chapter 13 bankruptcy, you give up a lot of financial control to your bankruptcy trustee. Even though you keep possession of your property, like a home, it becomes part of your Chapter 13 bankruptcy estate. The trustee manages this estate and makes major financial decisions that affect your property. This includes buying or selling a home.
During Chapter 13 bankruptcy, it is possible for a debtor to incur secured debt, including a new home mortgage. In order to purchase a house during Chapter 13 bankruptcy, the debtor must first get permission from the bankruptcy trustee and court to approve their Motion to Incur Debt.
A mortgage pre-approval is like a dry-run of the mortgage process. This pre-approval will prepare you for a mortgage by helping you build a budget, show you rates, and check your credit score. When it comes to buying, a pre-approval will prove to the buyer that you are prepared and serious about your offer.
The waiting period to buy a house after bankruptcy depends on whether you filed Chapter 7 or Chapter 13 bankruptcy and the type of loan you seek. Waiting periods after Chapter 7 is discharged vary from two to four years. After Chapter 13 is discharged, some federal loans are available immediately, though a conventional loan requires a two-year waiting period.
Several common-sense tips apply, starting with addressing your finances to improve your credit score before you file for bankruptcy. Getting the financial house in as much order as possible before filing means you will start a challenging process with the highest credit score possible.
Sound advice can help you weave your way through the obstacle course. A nonprofit credit counselor can sit down with you and go over budgets and ways to approach buying a home after bankruptcy. A financial professional can offer credit counseling or help in improving your credit score.
This chapter of the Bankruptcy Code provides for adjustment of debts of an individual with regular income. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years.
A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period \"for cause.\" (1) If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. 1322(d). During this time the law forbids creditors from starting or continuing collection efforts.
This chapter discusses six aspects of a chapter 13 proceeding: the advantages of choosing chapter 13, the chapter 13 eligibility requirements, how a chapter 13 proceeding works, making the plan work, and the special chapter 13 discharge.
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on \"consumer debts.\" This provision may protect co-signers. Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.
Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's combined total secured and unsecured debts are less than $2,750,000 as of the date of filing for bankruptcy relief. 11 U.S.C. 109(e).An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. 302(a). (The Official Forms may be purchased at legal stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)
Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position.
When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. 1302. In some districts, the U.S. trustee or bankruptcy administrator (2) appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. 586(b). The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. 1302(b).
Filing the petition under chapter 13 \"automatically stays\" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. 362. Filing the petition does not, however, stay certain types of actions listed under 11 U.S.C. 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.
Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a \"consumer debt\" from any individual who is liable along with the debtor. 11 U.S.C. 1301(a). Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. 101(8). 59ce067264