One of the biggest advantages to filing for Chapter 13 bankruptcy is to protect your home from foreclosure. The Chapter 13 plan allows you to resolve your missed or late mortgage payments without worrying about the threat of foreclosure. Although Chapter 13 allows you to get caught up in a payment you can afford, there may still be questions about your future ability to maintain the mortgage payment after the case is complete.
Can I Refinance?
The good news is that refinancing a mortgage to a lower interest rate, and thus lower payment, is possible even if you are in the middle of a Chapter 13 bankruptcy. However, there are some stipulations to the process when you have an active bankruptcy case.
First, you must obtain permission from your bankruptcy trustee before pursuing a refinancing agreement with your lender. The trustee is responsible for the execution of the repayment plan and oversees the creditor payments during the case. Since refinancing the mortgage is likely to change your financial situation it is important that you obtain their permission first.
Second, you must also be at least one year into your Chapter 13 repayment plan and be current on all past monthly payments. In other words, you must have been making timely payments under the plan for the last 12 months. The reason is that missing a payment in bankruptcy can jeopardize the case and may even lead to dismissal, which would then threaten your ability to get further help from your lender.