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How can I sell, refinance or buy a home during my Chapter 13 plan? The title insurer handling the sale, refinancing or purchase of a home will probably want approval of the transaction from the court or the Chapter 13 Trustee. Getting this approval will depend on whether your plan has been confirmed, as well as a number of other factors.


Confirmed Chapter 13 plan. If your Chapter 13 plan has been confirmed, the title company will ordinarily require a copy of the confirmation order and a letter from the Trustee approving the transaction. You can request this letter directly from the Trustee without paying additional attorney's fees.  Our office will prepare the amended budget for a small charge, but unless you request and pay for attorney's services in making the application you will be handling the request on your own. The charge for preparation of the budget does not include any assistance in making the request to the Trustee.

 

The Chapter 13 Trustees have introduced requirements in order to gain their approval for the refinancing, purchase, and sale of homes. The information which the Trustees have advised us that they need differ depending on the transaction and are listed below.

 

Sale of Home

 

The Trustee ordinarily wants the following documents and information to approve the sale of your home:

 

1. Updated budget (statement of income and expenses), with housing costs to be those that will apply if the sale of real property is approved. If your disposable income has increased, and application is made during the first 36 months of the plan, the trustee may ask for an increase in plan payments, even if the home purchase is not authorized.

 

2. Copy of purchase/sale contract.

 

3. Estimate of mortgage interest (tax) credit that will be lost and effect on withholding requirements.

 

4. Copy of escrow instructions.

 

5. Copy of pre-audit statement or settlement statement.

 

6. Depending upon the length of time left in a plan, and the payment status of the case, the trustee may require that some or all future plan payments be made from exempt proceeds from the sale. Non-exempt proceeds may be taken by the trustee without reducing the number or amount of plan payments.

 

Refinancing or Purchase of a Home

 

The Trustee ordinarily wants the following documents and information to approve the refinancing or purchase of a home:

 

1. Updated budget (statement of income and expenses), with housing costs to be those that will apply if the home purchase is approved. If your disposable income has increased, and application is made during the first 36 months of the plan, the trustee may ask for an increase in plan payments, even if the home purchase is not authorized.

 

2. Copy of purchase contract (for home purchase).

 

3. Estimate of mortgage interest (tax) credit that will be available.

 

4. Copy of escrow instructions.

 

5. Copy of pre-audit statement or settlement statement.

 

6. Statement as to source of funds for downpayment or refinancing charges. If the source is savings from earnings during the first three years of the plan, the trustee may require an increase in plan payments even if the purchase is not approved. Loans or gifts from family, as well as the use of proceeds from the sale of a previous residence generally receive a favorable response.

 

7. Estimated relocation expenses (movers, truck rental, utility deposits, etc.) if home is being purchased.

 

Before Chapter 13 plan has been confirmed. Generally, the Trustee will not approve the refinancing, purchase or sale of property except on a motion (or stipulation) filed with the court and approved by the judge. This may require notice to all of your creditors, and a hearing before the judge. We have no control over whether the court requires a hearing, and the date that the court sets for the hearing. Although we have been able to get prompt approval in recent cases, it has taken as much as 60 days before we have been able to obtain a hearing.

 

Because of the extent of services required to file the motion or stipulation, there is a substantial charge. This must be paid prior to action being taken on the request, and is not refundable if the Trustee or the court deny the request. Talk with your attorney for an estimate of the charges.