I am in a Chapter 13 bankruptcy and own my home outright. Can I still get a Reverse Mortgage?By Ron G. on 12.27.2018
You can get a reverse mortgage while in Bankruptcy, but there are a few provisions you must meet. You must have been in the proceedings for at least 12 months with no late or missed payments under the plan. The Bankruptcy Court must approve the borrower to receive a HECM loan and the proposed program.
Depending on your overall credit profile, both before the Bankruptcy and especially over the past two years with payments on the mortgage, taxes, insurance, and any other property charges, you may or may not be required to establish a set-aside account to pay the taxes and insurance in the future if you can qualify for the loan and that I cannot answer without seeing the entire credit profile and your reasons for what led to the Bankruptcy.
If your credit was good before the Bankruptcy and the Bankruptcy resulted from something out of your control (i.e., medical expenses), and all your property charges have always been kept current, you may be able to avoid the requirement for the set aside. That would have to be determined by the underwriter.
Suppose you need clarification on this determination, which would make or break your decision to obtain the reverse mortgage. In that case, I suggest that you have the lender review your complete credit profile before you invest in a property appraisal. This might lengthen the entire process, but it would keep you from spending money needlessly if the loan would not work out for you anyway.