Mortgage during Chapter 13

chibi · ‎05-10-2020

We are in 5 year payment plan ( not 100%) and made 12 payments on time so far. We filed in Dupage County, IL ( Northern Districs of Illinois). Trustee's website says " The Trustee does not have the authority to approve incuring debt" so I guess I would have to have my attorney file motion. When we filed for bankruptcy I asked him if there is a chance of us getting approved for the mortgage and he said he never had a case where mortgage was approved. I read so many stories online where people were succesful with obtaining mortgage. Our rent is kind of high now and I know we can get mortgage to be similiar to our rent and therefore not affect payment plan. I would like to hear from anybody who was succesful with getting aproval from this particular court

Thank you

FireMedic1 · ‎05-10-2020

Qualifying for a mortgage with a Chapter 13 bankruptcy. Depending on the circumstances of your case, you may be able to qualify for a mortgage while still working through a Chapter 13 plan. FHA, VA and USDA (Rural Housing) lending programs do approve borrowers who are in a court-supervised payment plan.

BK Free Aug25

chibi · ‎05-10-2020

I understand FHA works with Chapter 13 and I know there are few requirements and I am sure I we will be able to to meet all of them but just would like to know how "friendly" is Northern Bankruptcy Court in Illinois. There is got to be somebody out there who tried getting approval from this court and I would like to hear their stories

Thank you

Anonymous · ‎05-11-2020

@chibi - I just made my 2nd plan payment. My friend Kenn recently purchased his home in ATL during his plan and my lawyer said (I'm in South Florida) he had several of his other his clients obtain mortgages during their chapter 13 as well. I called a few lenders myself, and they all said yes, with permission from the trustee and a minium credit score of 620 on all reports... I saw a few posts on here as well. When you Google banks that offer mortgaes during chp 13, People's Bank pops up 1st.

Please keep up posted on your journey. Best of luck!

Anonymous · ‎06-11-2020

@Anonymous used People's Mortgage to obtain her loan during chapter 13. I have spoken with a few lenders as well, it's doable. You must get written permission from your lawyer/trustee.

Anonymous · ‎06-11-2020

Hi, I’m not sure about that particular court, however it never hurts to try! Keep us updated. Best of luck!

Anonymous · ‎06-14-2020

Sounds like you need a new attorney. I am filed 13 in the northern district on IL same as you. And I was approved for a mortgage and was able to motion the court to incur debt. It was approved with no push back from the trustee whatsoever. It was the easiest process. Took 6 weeks for the approval from the court. Only because they need to give time to let creditors object to us getting the mortgage. The magic formula is to show to the trustee in your motion/updated schedules that you can afford the mortgage. We moved some money around from our original schedules to show we had extra cash available for the extra monthly expense. Granted we were already paying rent almost as much as the new mortgage would be, so it was not a big deal.

But say you are paying $1200 a month in rent and want to get a $2000 mortgage, the trustee will need to see where and how you have that extra $800 now and may say no to the new loan, then require you to pay that extra $800 per month to the plan going forward. So keep in mind what you are paying now for rent, and that it needed to be in the schedules you filed with the 13. And also that the new mortgage payment (taxes, principle, insurance, HOA...) all need to be included in the new payment and not too far from what you are already paying.

With all this being said, it was a simple task to rearrange some of the expenses from the original schedules to show the extra $250 we needed to go from rent to mortgage. Once it was filed, it was a waiting game. The trustee did not object and the judge signed it same day. Took that to the lender along with about one hundred million supporting documents for everything you could imagine, and it was completely approved and we closed.

If your lawyer is telling you its a stretch or its impossible, its because hes being lazy or not wanting to do more work for you for free basically since you are already filed. Your case should be a money maker for him going forward, with little to no effort. Now asking him to work the numbers with you, file the motion and go to court to talk to the judge is more work and Im assuming hes not wanting to do all that for free.

chibi · ‎06-14-2020

Few months before we filed for Chapter 13 bankruptcy we moved to more expensive apartment. I figured I would rather rent something better than rent something cheap and pay that difference to creditors. My idea was that once we pay 12 payments we would try to get mortgage and buy a house and I figured as long as I keep my mortgage payment withing ballpark of the rent We would be fine. That way I would have a decent amount to work with as a monthly payment and therefore buy something nice. Do I have to go through my lawyer to file Motion to incur debt or thats something I can do myself?

Anonymous · ‎06-14-2020

I believe you can file on your own, but its highly recommended you let the lawyer do it. They "supposedly" know the trustees and judges and processes very well, and can work the system to your advantage when you might not be able to. For this, you might want to call a few local attorney's to see if someone else would be willing to file it for you. You will probably have to pay them separately.

But sounds like you are in a good place with the rent payment at least. My lender was concerned about "payment shock". Basically when your new mortgage payment would be more than 20% higher than your existing housing payment. But we were not beyond that so it was fine. They will want proof from the trustee that you paid your 12 payments on-time. Call the trustee's office and talk to the book keeper and she can email you a transcript from their system showing your payments, the ammount and when they were made. But before you can get the approval you need 12 consecutive ontime payments. Thats a deal breaker.

Not to mention the explaination letter as to why you filed. Now listen to me carefully (read..lol). This letter needs to say why you had no choice to file, and that it was of no fault of your own. That last sentence is the difference between denial and approval. I'd type it again, but Im lazy. So when you write your explaination letter to the bank as to why you filed, the story needs to read like what I said above. **VERY IMPORTANT**. Aside from that they will want every doc from the BK, mine wanted a year's worth of pay stubs, more docs then you could shake a stick at. This was more frustrating than anything. But once all was in and looked at, it was good.

We are in our house now and it was all worth the headache. Goodluck. FYI we are filed in IL northern district, but we moved out of state and bought a house in the south.

Anonymous · ‎09-17-2020

I am curious if you were able to obtain approval from the judge or trustee? I am 3 years into my 5 year chapter 13, and obtained preapproval from lender. As soon we we put an offer I submitted contract and other paper work from lender, plus updated expense list and paystubs to my lawyer to file motion. I sent that info to my bankruptcy attorney 6 business days ago, and the office hasn't gotten back to me if it's been submitted or not. I called today and spoke with an associate who said he would have my attorney follow up, but I feel like we are racing against the clock. The seller wants to close by the end of October, which the lender says is doable, but I am waiting on the approval from the courts. I am hoping it doesn't take that long. I have called and emailed my bankruptcy attorney twice also, but haven't gotten an answer other than my lawyer has received all my documents. An associate at the office stated that it could take a week to submit the motion, and our judge in the IL northern district court has a 15 day waiting period. Not sure what that means. I'm a bit frustrated and hope we have answers soon so we know how to proceed.