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Wayne Godare, Chapter 13 Trustee |
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SELLING OR REFINANCING YOUR HOME DURING YOUR CHAPTER 13 BANKRUPTCY CASE Do you want to sell your home? Do you want to refinance your home? Do you want to complete your Chapter 13 Plan through either a sale or refinance? Your Chapter 13 Trustee will help you achieve your goal and complete your real estate transaction as quickly as possible. Benefits to you for completing your Chapter 13 Plan by way of sale or refinance: 1. Your assets continue to receive protection from actions by your creditors. 2. Your wages and bank accounts continue to receive the same protection. 3. You can avoid liens and judgments which impair your homestead exemption. 4. MOST IMPORTANTLY, you receive your discharge of debts in bankruptcy and your fresh start. The Trustee recommends you contact your attorney to assist you in completing your real estate transaction. Most sales or refinances require some kind of notice to your creditors and the sooner you give that notice the sooner you can complete your sale or refinance. You can obtain more information on selling and refinancing your home by clicking on the links set out below. Please take the time to review the information since the Trustee provides this information to help you streamline the sale or refinance process.
Anytime you refinance your home while you are in a Chapter 13 case, you must obtain the Chapter 13 Trustee’s approval or the approval of the Bankruptcy Court. If you intend to use the refinance to complete your Chapter 13 Plan, you also will need to provide the Trustee with information and documents the Trustee needs to grant you approval for the new loan and to quote you an accurate payoff of your Plan. In order to receive Trustee approval for the refinance, you will usually need to provide to the Trustee the following documents: 1. A written authorization to release information to a third party, signed by you or your attorney within the last 90 days. The Trustee needs this document before he can release your financial information. 2. A Preliminary Title Report 3. An Estimated Closing Statement (HUD 1) 4. If you are not paying off your plan, the Trustee will require some evidence of what your new monthly mortgage payment will be. 5. Copies of all your tax returns which are currently due according to the terms of your Plan and any other plan requirements if applicable (year-end pay stubs, proof of charitable contributions, etc). The Trustee needs this information to approve your refinance. Once the Trustee receives all of the required documents, please allow our office 14 business days to process your request for approval. You must have completed your Plan commitment period and payments before you can complete your Chapter 13 Plan through the refinance of your residence, unless you pay all the creditors who filed claims in your case, or the Court allows you to modify your plan. The Trustee does not rate your Chapter 13 payment history for the purpose of granting credit. Lenders may ask you for this information but the Trustee cannot provide it for you. The Trustee recommends you consult with your attorney before you enter into any agreement to refinance your home. Remember, the Bankruptcy Court usually requires you to provide notice of your refinance to your creditors. This notice contains a time period for the creditors to respond. This notice period is usually 23 days. Your attorney is the best party to help you with the required notice. Your attorney may be able to shorten the time period, if necessary. Your attorney may bill you for the help you receive, but the Trustee believes the fee incurred is money well spent if your refinance completes in a timely manner with proper notice. Your attorney has the ability to check the Trustee’s website to get the approximate amount necessary to complete your Chapter 13 Plan and pay off your case. This amount will be subject to final audit by the Trustee and will depend on various factors. However, the payoff on the website is a good place to start, if you intend to pay off your case through the refinance. Anytime you sell your home while you are in a Chapter 13 case, you must obtain the Chapter 13 Trustee’s approval or the approval of the Bankruptcy Court. If you intend to use the proceeds from the sale to complete your Chapter 13 Plan, you also will need to provide the Trustee with information and documentation the Trustee needs to quote you an accurate payoff of your Plan. In order to receive Trustee approval for the sale, you will usually need to provide to the Trustee the following documents: 1. A written authorization to release information to a third party, signed by you or your attorney within the last 90 days. The Trustee needs this document before he can release your financial information. 2. A Preliminary Title Report 3. An Estimated Closing Statement (HUD 1) 4. If you are not paying off your plan, the Trustee may require new income and expense schedules since you no longer have the old mortgage payment. 5. If you also intend to pay off your Chapter 13 Plan, copies of all your tax returns which are currently due according to the terms of your Plan and any other plan requirements if applicable (year-end pay stubs, proof of charitable contributions, etc). The Trustee needs this information to approve your sale. Once the Trustee receives all of the required documents, please allow our office 14 business days to process your request for approval. You must have completed your Plan commitment period and payments before you can complete your Chapter 13 Plan through the sale of your residence, unless you pay all the creditors who filed claims in your case, or the Court allows you to modify the plan. The Trustee recommends you consult with your attorney before you enter into any agreement to sell your home. Remember, the Bankruptcy Court usually requires you to provide notice of the sale to your creditors. This notice contains a time-period for the creditors to respond. This notice period is usually 23 days. Your attorney is the best party to help you with the required notice. Your attorney may be able to shorten the time period, if necessary. Your attorney may bill you for the help you receive, but the Trustee believes the fee incurred is money well spent if your sale completes in a timely manner with proper notice. Your attorney has the ability to check the Trustee’s website to get the approximate amount necessary to complete your Chapter 13 Plan and pay off your case. This amount will be subject to final audit by the Trustee and will depend on various factors. However, the payoff on the website is a good place to start, if you intend to pay off your case through the sale. Frequently Asked Questions Concerning Selling or Refinancing Your Home While in Chapter 13 1. I am selling my home. Am I allowed to keep any proceeds from the sale? After paying your mortgage, property taxes, and certain other liens, you can keep the portion of the proceeds which represents your homestead. 2. What is a homestead? Your homestead is the amount the law allows you to retain, from the sale proceeds, to reinvest in another homestead. In Oregon, the homestead is $40,000 for an individual, and $50,000 for a couple. If Federal exemptions were used, the amount will vary. You should consult with your attorney. 3. What are the rules concerning reinvesting my homestead? Your escrow agent will remit the homestead funds to your attorney who will place the funds in to trust. You must reinvest the funds into another homestead within 12 months of the sale. If you do not reinvest the homestead your attorney must send the homestead funds to the Trustee for distribution through your Plan. 4. What happens to the net sale proceeds over and above my homestead? Your escrow agent will pay all funds in excess of your mortgages, property taxes, certain liens, and your homestead to the Trustee for distribution through your Plan. 5. Do I need to obtain a Court Order to sell or refinance my property? If your sale or refinance is not part of your confirmed Plan, the Court will require you to give notice of the proposed transaction to your creditors. If your sale or refinance is part of your confirmed Plan, the Trustee may be able to approve the transaction without notice and/or an Order. 6. What do you mean by “Notice” anyway? A “Notice” is a document filed with the court and then served on all your creditors. It describes the terms of your sale or refinance and provides an opportunity for your creditors to raise an objection to the transaction. The usual period of time allowed for such an objection is 23 days. Your attorney will prepare the Notice for you. 7. How do you calculate the amount required to pay off my case? Your payoff is calculated by the Trustee and includes: the remainder due under your Plan to secured, priority, and general unsecured claim holders; amounts due from your tax refunds; and amounts due because of special provisions in your Plan. Your attorney can obtain an approximate payoff from the Trustee website and explain how the Trustee calculated the amount due. 1. The Trustee will not release your financial information to a third party until we receive written authorization to do so. This authorization must be signed by you or your attorney within the last ninety days. 2. You must have the Trustee’s approval and/or the approval of the Court before you can complete a real estate transaction. 3. The Court may require you to provide notice of the proposed real estate transaction to your creditors prior to allowing the transaction. This notice typically allows 23 days, or longer, for your creditors to respond. 4. The Trustee recommends that you contact your attorney for advice on how to proceed with your sale or refinance. The attorney is the best person to prepare the required notice for you. 5. At a minimum, the Trustee must review the preliminary title report and the estimated closing statement (HUD 1) before he can approve any refinance or sale of your property. 6. The decision of whether and when to sell or refinance, in order to get the maximum financial benefit to you in your Chapter 13 Bankruptcy case involves a number of factors. The Trustee strongly recommends that you consult with your attorney to discuss this decision. 7. You must direct any questions, or issues regarding the payoff of your mortgage(s), to the lending institution itself or to your attorney. The Trustee cannot provide you any information regarding either the principal amount due on the mortgage or what post-petition charges the mortgage company may be asserting. The Trustee has no information on what the lender is reporting to any credit bureau. 8. If the lender asks you to provide an explanation for why you missed payments under your Chapter 13 Plan, you must ask your attorney for help with this explanation. The Trustee doe not rate or critique your payment history and does not issue any kind of credit rating or credit report.
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