Carolyn Writes In And Wants a New Mortgage In Bankruptcy

Posted by Steve Rhode

October 11, 2008

Carolyn wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.

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“Dear Steve,

My husband and I are in bankruptsy, we have a 3 year plan with one year left on the plan. Our mortgage company has us on an ARM and wont remodify our loan.

How can we get out of chapter 13 and get into a fix rate mortgage?

Carolyn”

Dear Carolyn,

I’m afraid it isn’t as easy as it sounds. Before you do anything to impact your bankruptcy I would advise you to talk to two people, your bankruptcy lawyer and a mortgage broker.

There are so many different types of mortgage loans available that it would be unwise for you to do anything here without getting the specifics about what mortgage loans are actually available for someone that has just emerged from bankruptcy.

I’m not sure that breaking out of your bankruptcy is an idea even worth considering if you have other debts in your bankruptcy. If the Chapter 13 bankruptcy plan fails or stops before a successful completion then your creditors could come back after you for the full amount due.

If the mortgage is the only debt left in the bankruptcy plan than I have seen situations when it can make sense to let the bankruptcy fail and then go for a loan, but there examples are rare.

There is no way I would make any move here without input and a coordinated approach by your bankruptcy attorney and the mortgage broker that will handle any possible mortgage refinance that may be available to you.

Just remember that no matter what you do right now, your credit score and recent credit history are horrible because of the bankruptcy and the chances of you getting a really good fixed rate mortgage are slim at best.

Big hug.

Steve

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