DSCR loans, investing, and ch 13 bankruptcy

Lender · Marlboro, NJ · Member since 2025 · 243 posts · 150 votes

I don't work directly on the legal side, but from the lending side of the market the big thing I've seen is that there isn't a single "DSCR rulebook" once you get outside agency lending.

A few general observations:

• The 3–4 year waiting period people quote is more of a guideline tied to certain lenders, not a universal standard. On DSCR deals, many lenders care more about current credit behavior, liquidity, and property cash flow than the event itself once you're post-discharge.

• During an active Chapter 13 plan, the limiting factor is often court approval, not just lender willingness. Even asset-based lenders that are open in theory can get sidelined if the court views new debt as conflicting with the plan.

• Entity structures help, but they’re not a full workaround. Lenders and courts still tend to look at ownership and control, even when there’s no personal guarantee.

From what I’ve seen, people who use Chapter 13 effectively tend to treat it as a reset window, stabilizing income and credit, then being very intentional about acquisitions after discharge rather than forcing deals mid-plan.

Not legal advice of course, just how it tends to play out on the financing side.

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Mayo Gilfurt

Real Estate Consultant · Connecticut Ct · Member since 2026 · 130 posts · 30 votes

8mo

DSCR is more flexible than conventional, but post-BK lenders will focus heavily on reserves, property cash flow, and seasoning. I've seen options open up sooner with the right structure. What market and price range are you targeting?

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Erik EstradaBusiness Member

Lender · Member since 2022 · 6k+ posts · 1k+ votes

8mo

Quote from @Christina Thompson:

Hi everyone. I’m hoping to get some real world insight and I ask upfront that responses be constructive and respectful.

For context I’m a realtor, single mom of three and started flipping houses last year. Over the last couple of years my finances and assets were heavily impacted by a federal case involving my spouse. As a result assets tied to that situation were seized or forfeited, and I’ve been rebuilding from scratch while raising my kids on my own.

I'm not sharing this for sympathy just to explain why my situation isn't straightforward and to gain insight from those who have navigated a complex situation like mine and still been successful in REI.

I'm currently weighing whether filing Chapter 13 makes sense as a strategic reset, but I don't want to unintentionally stall my ability to continue investing long term particullary when it comes to DSCR loans.

I’d really appreciate hearing from people who’ve actually been through this or worked closely with investors who have. Specifically:

Has anyone here filed Chapter 13 and still invested during the payment plan period or after discharge?
For DSCR lenders, Is the commonly quoted 3-4 year wait after discharge universal or lender specific?
If an LLC is owned by two partners, for example a family member and myself, and the LLC takes on a DSCR loan with no personal guarantee from the partner in Chapter 13, has court approval typically been required in your experience?
Where have you seen the line between needing court approval versus simply disclosing entity level, asset based debt?
Looking back, did Chapter 13 ultimately help or hurt your long-term investing momentum?

I already have an attorney and am not seeking legal advice here. I'm trying to make an informed decision and would really value insight based on real experience not just theory.

If you have experience here, I’d really value your insight. Thanks in advance.

This question will be lender specific. There are a few business purpose lenders that won't really care about it as long as you have the credit, assets, and reserves to back it up. Others will require a seasoning period as you stated.

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Stacy RaskinBusiness Member

Lender · Member since 2022 · 1k+ posts · 513 votes

8mo

On the lending side, DSCR lenders will vary as they write their own guidelines that they use generally to sell their loans at the end of the loan process. This is lender specific. Lenders may have a waiting period such as two years but this varies.

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Nicholas Cokas

Member since 2021 · 82 posts · 79 votes

7mo

Christina, great questions and the existing replies are solid — let me add what I've seen on the specific mechanics you're asking about.

On the LLC + DSCR question (your most nuanced one):

The personal guarantee piece matters, but it's not the whole story. If you hold beneficial interest in the LLC — even 50% — most Ch13 trustees in the Eastern District of Virginia will treat entity-level debt

as a de facto obligation on the estate, regardless of whether your name is on the note. The question isn't just "is there a personal guarantee?" It's "does the debtor benefit from this transaction?" If yes, trustees want visibility.

The line I've seen drawn in practice: entity debt secured only by the asset with no recourse to the individual partner in Ch13 is the strongest argument for disclosure-only (no court approval). But "no personal guarantee" needs to be airtight — no carve-outs, no bad boy provisions that could loop you in.

Best move: your attorney files a motion under §363 proactively. It's typically uncontested if the deal is clean, it costs almost nothing to get, and it bulletproofs the transaction from a plan-modification challenge later.

On the 3–4 year wait:

Erik and Stacy are right — that number comes from conventional/agency guidelines, not DSCR. Non-QM lenders writing their own overlays often go to 1–2 years post-discharge, sometimes less with strong reserves and a cash-flowing property. A few go to 24 months from filing date, not discharge — worth asking that specific question when you shop lenders.

On whether Ch13 helped long-term:

The ones I've seen come out ahead used the plan period to do exactly what you're doing — stay active in REI without taking on new personal debt. They built reserves, kept their properties performing, and discharged into a clean balance sheet. The investors who struggled tried to force new acquisitions mid-plan and created trustee friction that cost more time than it saved.

Norfolk market is real right now. The reset window isn't wasted time if you're using it intentionally.

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Stacy RaskinBusiness Member

Lender · Member since 2022 · 1k+ posts · 513 votes

7mo

DSCR loans will have a waiting period after bankruptcy generally speaking. Their guidelines may be shorter waiting periods compared to conventional depending on the company but generally DSCR guidelines are not allowing for mortgages right after a bankruptcy.

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Account Closed

Member since 2026 · 35 posts · 3 votes

6mo

Christina, thanks for being so open about what you’re navigating — a lot of investors read posts like this quietly because they’re in a similar spot but don’t feel comfortable sharing it publicly.

Big picture on Chapter 13 and investing

I’ve worked with investors who either filed Chapter 13 or had a recent bankruptcy and were still able to rebuild a rental portfolio over time, but the path usually shifts from “traditional” financing to more non‑QM/DSCR and private money options for a while.
The key themes I’ve seen matter most: clean on‑time payment history during the plan, a clear story for what happened, and conservative leverage with solid reserves so each new deal actually strengthens your position instead of stretching you.

DSCR loans after Chapter 13

The "3–4 year after discharge" rule of thumb is not universal; it's lender‑ and program‑specific, especially in the DSCR/non‑QM world.
Some programs require 3+ years seasoning after discharge, others are comfortable sooner if the payment history is strong and the bankruptcy is clearly a one‑time event, and a few won’t touch an active plan at all.

Investing while in an active plan

For borrowers in an active Chapter 13, most institutional DSCR programs either require the plan to be completed or, at minimum, 12 months of on‑time plan payments plus written approval from the trustee/judge to take on new mortgage debt.
Even when it’s allowed, the court will usually look at whether the new loan payment jeopardizes your ability to keep making the Chapter 13 payments as agreed.

LLCs, guarantees, and court approval

In practice, many DSCR and asset‑based lenders still want some form of personal guaranty, even when lending to an LLC; true no‑guarantee structures tend to be more niche, more expensive, or require stronger equity and experience.
Where an owner is in Chapter 13, I've often seen counsel assume court approval is needed any time that owner is effectively taking on new debt or contingent liability (including a guaranty), even if the borrowing entity is an LLC; purely entity‑level, non‑recourse structures may reduce that, but trustees can view "new investment debt" skeptically if it appears to divert cash flow.

How Chapter 13 impacts long‑term momentum

For some investors, Chapter 13 functioned as a structured “reset” that stopped the bleeding, forced a disciplined plan, and made it easier to present a coherent recovery story to lenders a few years later.
For others, the constraints on taking on new debt during the plan meant they focused on lighter‑capital strategies (wholesaling, brokerage income, partnerships) until they were far enough past discharge to access better DSCR terms, then used that stronger footing to scale.

If you want to pressure‑test scenarios

I'm a mortgage broker focused on DSCR and other investor‑focused products, and I've worked with clients who had BKs, federal issues, and other "non‑clean" histories and still got back to building rentals over time. If it would be helpful, I'm happy to walk through a couple of hypothetical timelines (e.g., "file now vs. don't file," "invest during plan vs. wait until discharge") so you can see how different lenders are likely to view each path from a financing standpoint.

No legal advice, of course — just underwriting and lender‑guideline perspective to add to what you and your attorney are already mapping out.

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Nyron Isaac

Member since 2024 · 144 posts · 28 votes

3mo

Your investing career is far from over. The 3-to-4-year bankruptcy waiting period is a rigid conventional mortgage rule—it does not apply universally to commercial DSCR lending. Many non-QM alternative lenders will write DSCR loans with zero seasoning required post-discharge, and some will even fund deals while you are in the plan if you have 12 months of clean payment history.

To bypass the court trustee approval bottleneck entirely, leverage a multi-member LLC structure. Set your ownership percentage at 19% or less, and have your partner hold 81%+. Standard DSCR guidelines only require a Personal Guarantee from members owning 20% or more.

By sitting below that threshold, the lender will underwrite the property's cash flow and your partner's credit profile alone. Your name stays off the personal guarantee, meaning you are not incurring personal debt, which eliminates the need to wait for bankruptcy court signatures. Take the strategic reset if you need it, structure your entities correctly, and keep pushing forward

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Vijay FriedmanBusiness Member

Miami, FL · Member since 2026 · 766 posts · 123 votes

3mo

Quote from @Christina Thompson:

Hi everyone. I’m hoping to get some real world insight and I ask upfront that responses be constructive and respectful.

For context I’m a realtor, single mom of three and started flipping houses last year. Over the last couple of years my finances and assets were heavily impacted by a federal case involving my spouse. As a result assets tied to that situation were seized or forfeited, and I’ve been rebuilding from scratch while raising my kids on my own.

I’m not sharing this for sympathy just to explain why my situation isn’t straightforward and to gain insight from those who have navigated a complex situation like mine and still been successful in REI.

I’m currently weighing whether filing Chapter 13 makes sense as a strategic reset, but I don’t want to unintentionally stall my ability to continue investing long term particullary when it comes to DSCR loans.

I’d really appreciate hearing from people who’ve actually been through this or worked closely with investors who have. Specifically:

Has anyone here filed Chapter 13 and still invested during the payment plan period or after discharge?
For DSCR lenders, Is the commonly quoted 3-4 year wait after discharge universal or lender specific?
If an LLC is owned by two partners, for example a family member and myself, and the LLC takes on a DSCR loan with no personal guarantee from the partner in Chapter 13, has court approval typically been required in your experience?
Where have you seen the line between needing court approval versus simply disclosing entity level, asset based debt?
Looking back, did Chapter 13 ultimately help or hurt your long-term investing momentum?

I already have an attorney and am not seeking legal advice here. I'm trying to make an informed decision and would really value insight based on real experience not just theory.

If you have experience here, I’d really value your insight. Thanks in advance.

@Christina Thompson
You're asking thoughtful questions, and unfortunately there isn't one universal answer. DSCR guidelines for Chapter 13, discharge timing, and LLC borrowing can vary quite a bit by lender. It usually comes down to the specific bankruptcy status and the lender's overlays rather than a single industry standard. Have you already filed Chapter 13, or are you still weighing that decision?

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DSCR loans, investing, and ch 13 bankruptcy

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Big picture on Chapter 13 and investing

DSCR loans after Chapter 13

Investing while in an active plan

LLCs, guarantees, and court approval

How Chapter 13 impacts long‑term momentum

If you want to pressure‑test scenarios