How to get a small home loan before bankruptcy?

I have a peculiar situation. I will be filing Chapter 7 soon, but I am obligated to buy a home because of a state grant given to me (Hurricane Katrina) as well as I would like to be able to use the state homestead exemption. I have an unimproved lot that I need to sell to cobble together with some cash I have enough to buy the home and do some needed repairs on the home (what do you expect for a home that costs only $52K?) Unfortunately, even at a 25% discount, I am having problems selling the lot at a high enough price to give me the necessary cash - although at a 40% discount, I seem to have some interest.

And in any case, it seems that I would need to pay the trustee a few $K to be able to the keep the house. It would be far better for me to have a small mortgage on the home as I go through bankruptcy, so the bankruptcy trustee would see the lower equity value and decide that it is not worth selling. I would have no problem paying back the loan after the bankruptcy as I have a nice fat 401K that I plan on tapping after the bankruptcy filing. If I were to tap it before the bankruptcy, I would be basically be adding that to the bankrupcty estate, so I don't want to do that.

My official income for 2008 was all capital gains, and was about $2K, so I could not qualify for any loan based on that, and of course, my credit history is being trashed as I have not made any payments for the last month (ironically, if I had just decided to stop paying my debts 2 months before, I would have another $8K in the bank, and I wouldn't be having any problems now.)

So I am looking for any way to do this. I am not the type of person to impose on friends. I would really like to find some sort of peer to peer lender. Even in my horrible situation, I could probably find such a lender, but it seems that the peer lenders I've browsed all do unsecured loans, which can't help me. I need someone to take an official secured position in my home.

I appreciate any help. Thanks

You are right that the peer to peer lenders all do unsecured loans, and that's not going to be a good option for you. You're going to have to turn to people you can talk with face to face.

It sounds like you are looking for a hard money loan. Call some mortgage brokers in your area and ask them to put you in touch with hard money lenders that are well-established. These are typically high net worth individuals who are looking to make a relatively short term loan at a high interest rate.

If you can document that they won't be wiped out in bankruptcy, and that they can get out quickly, then you may be able to accomplish your goal. I don't know for certain, but that's my best bet.

I assume you have run this scenario by your bankruptcy attorney? If not, you must do that before you take on any new debt or do anything to jeopardize your filing. (It sounds like you have, but just want to make double sure.)

Please be very about not getting involved with any internet lenders. We've posted numerous horror stories on the forums from people who have been ripped off.

Let us know what happens!