Financing with bunkraptcy?

Question

Dear fellow members,

I was wondering what and if are there any reasonable options to obtain financing while someone is under business chapter 13. I have heard that, there may be possibility to get an FHA but only after 3 yrs after bankruptcy has been granted. That would be a loan for either single or multifamily home (duplex or so) with approximately 50% down. Any feedback much appreciated.

Jakub Bednarz · Answer

@Hattie Dizmond - thank you for the insight.

@Phil B. - In this case, the debt has been canceled, and all payments satisfied. Just been wondering how and if any loan is accessible, while having a steady income and some funds put away.

Anyways, thank you guys for the help.

Phil B. · Answer

More than likely the Trustee will never approve you to take a loan of any sort until you have settled your pay back and the 13 was satisfied.  He's just not going to let you get into more debt while you are paying off old debt for pennies on the dollar.  He'll say "if you have so much money to take on this new debt, why don't you make additional payments to your creditors."  ......basically.  He'll never allow it in my opinion.

Hattie Dizmond · Answer

@Jakub Bednarz This is directly from the FHA site...

Chapter 13 Bankruptcy

FHA will consider appoving a borrower who is still paying on a Chapter 13 Bankruptcy if those payments have been satisfactorily made and verified for a period of one year. The court trustee's written approval will also be needed in order to proceed with the loan. The borrower will have to give a full explanation of the bankruptcy with the loan application and must also have re-established good credit, qualify financially and have good job stability.

So, yes, you can get an FHA insured loan, while still in bankruptcy.  If you're looking for funding for a fix & flip, hard money would be an option as well, since it is more deal based than credit based.

On a different front, you said it was a "business bankruptcy".  However, since you're concerned about your ability to qualify for an FHA loan, I have to assume that business was a DBA or Sub-S, etc. - something that didn't offer you any personal protection from the business' liabilities.  If you're in bankruptcy, then you're probably working with an attorney and hopefully they have counseled you about structuring future entities to provide personal asset protection.  If they have not, please make sure your REI activities are held by an LLC or other similar entity that shields the individual from the corporation's liabilities.  It's imperative.  How do you think Donald Trump can file bankruptcy without missing a beat?  He didn't file.  His company did.

Good luck!