can you refinance a home loan while in chapter 13

Refinancing a home loan can be a beneficial financial move for homeowners, providing an opportunity to secure better interest rates or adjust the loan’s terms. However, individuals facing Chapter 13 bankruptcy may wonder if they can refinance their home loan while still in the process. The answer to this question is contingent upon several factors that need to be considered before proceeding with refinancing.

The Role of Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a form of debt repayment plan that allows individuals to reorganize their finances and pay off their debts over a period of three to five years. Unlike Chapter 7 bankruptcy, which involves liquidating assets to repay creditors, Chapter 13 bankruptcy focuses on establishing a repayment plan that allows individuals to catch up on their missed payments while keeping their assets, including their home. The reorganization plan is supervised by a bankruptcy court, which must approve any changes to existing debts, including refinancing a home loan.

When considering refinancing while in Chapter 13 bankruptcy, it’s important to understand the implications and limitations set forth by the court and the bankruptcy laws. Let’s explore some key factors that can affect your ability to refinance your home loan during this process:

  • Trustee Approval: Any major financial decision, including refinancing, must be approved by the bankruptcy trustee, who is responsible for overseeing your bankruptcy case. They will assess whether the refinancing is in line with the goals of your reorganization plan and consider factors such as the interest rate, closing costs, and the impact on your overall financial situation.
  • Equity Considerations: Refinancing typically requires having equity in your home. The bankruptcy trustee will evaluate the equity in your property and determine if refinancing is a viable option. If there is sufficient equity, it can be used to repay creditors or fulfill the terms of the bankruptcy plan.
  • Filing a Motion: To refinance your home loan while in Chapter 13 bankruptcy, you will need to file a motion with the bankruptcy court seeking permission to proceed. This requires providing detailed information about the new loan terms, the reasons for refinancing, and the potential benefits to your financial situation.

Factors to Consider Before Refinancing

Refinancing a home loan while in Chapter 13 bankruptcy involves careful consideration of various factors. Here are some key points to keep in mind:

  • Financial Stability: Refinancing might not be advisable if you are struggling to meet your current financial obligations. Ensure that you have the financial capacity to meet the new loan terms and continue making your bankruptcy plan payments.
  • Interest Rates: Refinancing can help secure better interest rates, reducing your monthly mortgage payments. However, it’s important to compare the interest rates between your current loan and the potential refinanced loan to determine if it’s financially beneficial.
  • Loan Term: Refinancing offers an opportunity to adjust the duration of your loan. Extending the loan term may result in lower monthly payments, but it also means paying more interest over the lifetime of the loan.
  • Costs and Fees: Refinancing involves closing costs and fees, which can eat into the potential savings from a lower interest rate. Consider the costs involved and evaluate if the overall financial benefits outweigh these expenses.
  • Professional Advice: Consult with a bankruptcy attorney and a mortgage lender experienced in dealing with refinancing during Chapter 13 bankruptcy. They can guide you through the process, help assess your situation, and provide advice tailored to your specific circumstances.

Refinancing During Chapter 13: A Case Study

Let’s consider a hypothetical scenario to illustrate the refinancing process while in Chapter 13 bankruptcy:

Scenario Details
Current Home Loan
  • Remaining balance: $200,000
  • Monthly payment: $1,500
  • Interest rate: 6%
  • Loan term: 30 years
Refinancing Proposal
  • New loan amount: $210,000
  • Monthly payment: $1,300
  • Interest rate: 4%
  • Loan term: 30 years
Trustee Approval Required – File a motion with detailed loan information and the rationale behind refinancing.
  • Appraised value of the home: $300,000
  • Remaining balance: $200,000
  • Equity: $100,000

In this case, the homeowner seeks to refinance their home loan while in Chapter 13 bankruptcy. The proposed refinancing entails an increased loan amount and a lower interest rate, resulting in a reduced monthly payment. However, trustee approval is necessary, and the available equity in the property plays a crucial role in determining the feasibility of the refinance.


Refinancing a home loan while in Chapter 13 bankruptcy is possible, but it requires careful consideration, adherence to the bankruptcy laws, and trustee approval. The decision to refinance should be made after thorough evaluation of factors such as financial stability, interest rates, loan terms, and associated costs. Seeking guidance from professionals experienced in both bankruptcy and refinancing can help ensure that you make an informed decision tailored to your unique financial situation.