How can I buy-out my bankruptcy?
If you have some equity in your home and you are in a chapter 13 bankruptcy but the bankruptcy payments are not helping, you might want to consider buying out your bankruptcy.
Lenders who are familiar bankruptcy buy-out will require a list of debts to be cleared with the pay-off. If the equity remaining in your home will cover the remaining pay-off of the bankruptcy agreement, the early pay-off will help speed up re-establishing credit. Although these mortgages come with a higher interest rate, the benefits of the early bankruptcy release along with immediate credit clearance usually out-way the temporary increase in interest rate.
Most Chapter 13 bankruptcy buyout programs will require that you have a 12-month history of on-time payments on your bankruptcy as well as any other credit accounts that remained open or have been recently opened. The buyout loan works just like any other cash-out refinance, but in this case the equity in your home is converted into money to pay off the remaining bankruptcy debt. You will need authorization from the bankruptcy court or your bankruptcy trustee before proceeding with the buyout loan, but your mortgage professional can help you obtain this authorization as part of the loan process.
The bankruptcy buyout loan is part of a financial plan to help you re-build your good credit. Once you have closed on your bankruptcy buyout loan, your Chapter 13 bankrputcy will be discharged. The interest rate on your mortgage will be higher for the short-term, but you can begin applying for credit again and by consistenly making on-time payments to your creditors, establish a good credit profile. After having been discharged from bankruptcy for two years, you may again be eligible for conforming interest rates and can consider refinancing to lower your interest rate and your payments.
You need to check with your Trustee to make sure there are not any certain rules or fees that will be associated with paying off your bankruptcy.