Refinancing Mortgage

What is the name of your state? PA

We are considering Ch. 7 or 13, but are looking at refinancing our mortgage. We can reduce our payment by $120 per month by taking out a 30 year fixed loan, however we will pay $11,000 more in interest over the life of the loan. The second scenario is refinancing for 15 years fixed with a savings of $68000 over the life of the loan, but our payments will go up $72 per month.

I realize we would need to refinance prior to filing 7/13, but I'm wondering if this could negatively impact our filing one way or the other. The 15 years seems to be the way to go, but I don't know if the court would frown upon refinancing a home and then filing 7/13.

Any advice?

Thank you.

[Ladynred]

They wouldn't frown on it at all, people do it all the time in an attempt to lower their debts. If it affects your disposable income it will have some kind of impact for either CH.

Yes, our disposable income would be affected by refinancing. In your opinion, are there any advantages/disadvantages for causing our disposable income to increase (30 yr mortgage) or decrease (15 year mortgage)? I don't want to hurt us one way or the other.

Thank you for your reply.

The more disposable income you show, the more the trustee is going to want to track down. The less you show, the better.
It would appear in this case that the best course of action would be to refinance with the first option, and use that additional income to pay off the existing debts (if Ch 13.) That would show the trustee that you're not just trying to eliminate debts, but really attempting to pay as much as you can, even though your financial situation is strapped.
The decision is yours because only you know how much you need to spend on necessities and secured loans... If the BK and loss of the additional disposable income (in a Ch 13) would hurt you, it might be best to go with a Ch. 7... depends on the equity in your home - is it exempt? They might force sale in a Ch. 7 if it's not.
In a Ch. 7, if you get to keep the home and reaffirm, you'll have a little additional money every month from this point on.
I assume you've checked the exemptions.. if you haven't, here's a link:

[url]http://www.thebankruptcysite.com/exemptions/pennsylvania.htm[/url]