Is it Possible to Refinance a Mortgage prior to Filing for Chapter 13 Bankruptcy?

If chapter 13 bankruptcy is looming in the distance, you may be faced with some tough personal decisions. The thought of filing chapter 13 is not something that anyone wants to deal with. However, if your situation gets bad enough, you may not have much of a choice. Most of the time, you have some serious debt that you believe you will not be able to get out of when chapter 13 becomes an option. One problem that many people in this situation have is with their mortgage. A mortgage is a big financial responsibility and the mortgage payment is often the largest payment in a person's budget. You may think about refinancing your mortgage prior to filing for chapter 13 bankruptcy. Here are a few things to consider in that regard. 

Before Filing

It is possible to refinance your mortgage prior to filing for chapter 13 bankruptcy. The important thing to realize is that you need to do it before you file. It is still possible to do it later, but it will be much more difficult to find a lender that will work with you. As it stands, it can be very difficult to get approved for a loan anyway. If you are in bad enough shape that you want to file chapter 13, then you probably have a very high debt load. Most of the time when lenders assess your credit worthiness, they will look at your debt to income ratio. For this reason, many people that are on the verge of chapter 13 will not qualify for a loan anyway. However, it is technically possible to refinance your loan before you file chapter 13.

Finding a Lender

If you really want to refinance your mortgage prior to filing for chapter 13, you will need to find a lender that will allow you to do so. This is often the most difficult part of the process. You should first try at a traditional lender and see if you can get approved. Try a lender that you feel comfortable with in your local market and see what they say. 

If the lender does not approve your loan, you may want to consider looking at the subprime lending market. You can access this market through a mortgage broker that specializes in that area. The subprime market deals with those that are considered poor credit risks. This market is filled with those that have low credit scores and high debt loads. When you apply for this type of loan, you need to be ready to pay high interest rates. Anytime a lender takes on extra risk, they are going to want to get an extra return out of it. Therefore, if you fall into this category, they are going to charge you more money to lend to you. 

Once you find a lender that is willing to work with you, the process is pretty simple. Fill out the application and they will work to get it approved. Then refinance the house and you can get started with your other debt issues.