Legal Question in Bankruptcy in Maryland

Re: Refinancing while in Chapter 13

You need approval because the lender won't lend without it (the title company won't be able to close the loan). Approval to refi to pay off a plan is routinely granted. See your lawyer, or contact an experienced bankruptcy lawyer if you don't have one.

Re: Refinancing while in Chapter 13

In some cases it makes sense to dismiss your bankruptcy prior to the refinance so that you do not require approval of the trustee. That depends on how many claims came in during your bankruptcy. If a lot of your creditors did not make claims, then it makes sense to do the refinance through the bankruptcy so that you can receive a discharge from those creditors who did not file claims. However, this can be VERY TRICKY if the timing is not right. You can find yourself without bankruptcy court protection and no refinance. If you need any further advice, feel free to contact me.

Re: Refinancing while in Chapter 13

Approval is not difficult to obtain and it is required. You will not be able to settle on the refinance without it. Additionally, there are penalties from your lender if you are not 100% honest on your application for the loan. The most severe is that you will be in default, the loan will be accelerated, and when you try to get bankruptcy protection you will be under the new bankruptcy law and may no longer qualify. The new law allows the Court and the Trustee to object to the bankruptcy based upon the debtor's abuse of the court's protections.

Have your attorney request approval for the refinance from the Court. If you don't have an attorney, contact one so that they can review your entire financial history and advise you of exactly how the proceeds will be distributed and whether what you want to accomplish can be accomplished.