Can We Apply for a Reverse Mortgage While We Are in Chapter 13?

Yes. If you are over 62 and qualify for a reverse mortgage, yes you can apply for one while you are in Chapter 13. I have had several of my clients do it while in a bankruptcy case.

Since it is "applying for credit," it is necessary to ask for bankruptcy court approval of the reverse mortgage before it is finalized. But that is not difficult for we attorneys that actively handle Chapter 13 cases, and I have not had one denied by the court, at least yet.

It can take 30 days or so to get court approval to obtain a reverse mortgage while someone is in bankruptcy, and the reverse mortgage company can be very particular about the language that goes into the court order, but it can be done.

With a reverse mortgage, you no longer are required to pay mortgage payments. But, you must pay the maintenance, homeowner's association dues, taxes, and homeowner's insurance while you stay in the house.

And while you don't have to pay the mortgage payments any longer, there is still a mortgage. It accumulates at interest and is due in full when you no longer live in the house (i.e. move into a nursing home, for example), or pass away.

So if you plan on leaving your home to your children or someone else, a reverse mortgage may not be what you want. But for some of my clients, they have no other real option of staying in their home, and they may be facing foreclosure, so a reverse mortgage has worked out very well for them. It just depends on your circumstances.