What If I Need A New Car While I Am In A Chapter 13 Bankruptcy?

Many times during a Chapter 13 bankruptcy the debtor will need to purchase a new vehicle.  A Chapter 13 is usually between three to five years in length.  During this time, it is common for a vehicle to begin having mechanical problems and sometimes need to be replaced with another, newer, vehicle. Should you need to purchase or replace a vehicle while you a?re in a Chapter 13 bankruptcy, it is very important  you contact your bankruptcy attorney in advance so that he or she can discuss the process with you.

In the event you need to purchase or replace a vehicle while you? are in a Chapter 13 bankruptcy, you will need to obtain approval to incur debt from the Chapter 13 Trustee and/or Court.

Request for Credit Authorization for the Bankruptcy Trustee

This is done by submitting a Request for Credit Authorization to the Trustee. The Bankruptcy Court permits the Trustee to approve credit authorization requests up to a certain loan amount (the maximum loan amount varies depending on the state and district your bankruptcy case was filed.) Your attorney will provide you with the information and necessary forms needed in order for you to obtain approval from the Trustee. In addition to completing a Request for Credit Authorization form, you will also be required to amend your budget.

Motion to Incur Debt with the Bankruptcy Court

If you are trying to obtain above a certain amount of debt to purchase a vehicle then must obtain permission from the bankruptcy court. To file a Motion to Incur Debt you need to communicate with your bankruptcy attorney and ensure they have the information they need to appropriately file the motion. Usually your attorney will need to know the amount you are looking to finance, the interest rate on the loan, the monthly payment and the time period you will be paying the loan back for.

A few important things for you to keep in mind should you need to obtain credit authorization approval from the Trustee or file a Motion to Incur Debt with the bankruptcy court is that he/she will be checking to see if you are current on your Chapter 13 plan payments and will be reviewing your amended budget to see if you can afford the new car and have the ability to make the new vehicle payments. You also will need to show having a new(er) vehicle is important to the success of your Chapter 13 plan. If the financing you are seeking to obtain for new vehicle within a Chapter 13 bankruptcy is reasonable then the Trustee or courts will almost always approve your financing request. Your bankruptcy lawyer can help walk you through the process of obtaining financing for a new vehicle.