A Chapter 13 Bankruptcy lasts for 5 years and a lot can happen in that time! You started bankruptcy with a car that was in good running condition and you thought it would last for at least the duration of your bankruptcy, but all of a sudden it breaks down and is extremely expensive to fix. The cost to fix the vehicle is just about what the car is worth!!! You decide it would be a smarter decision to just get a new car, but you would have to obtain financing and wonder if you can acquire a new car loan while still in your Chapter 13 Bankruptcy? In addition, you have also been informed that you must first obtain the court’s permission; is this true? The answer is you may possibly be able to obtain a new car loan, but there are a few additional steps to complete first, and then yes, you will need to motion for the court’s permission.
The key to being able to obtain a new car loan while in a Chapter 13 Bankruptcy is demonstrating to the court and trustee that it is absolutely necessary, that the cost of the new vehicle is reasonable and that the interest rate is fair. For example, you need a reliable car to get back and forth to work in order to make your Chapter 13 Plan Payments, but that luxury vehicle is not an essential. Your trustee understands this and wants to help you successfully complete your Chapter 13 Bankruptcy, but will not allow you to set yourself up for failure by obtaining a car loan you can’t afford. In other words, as long as the new car loan payments do not affect your Chapter 13 Plan Payments, then your trustee will most likely allow you to obtain the new debt.
Sine it can be difficult to obtain a loan from a conventional lender while still in bankruptcy (most do not understand the process of obtaining a loan while in bankruptcy or just do not want to take the risk), you will most likely need to contact a lender who specializes in financing for those who are in bankruptcy. They will need documentation from the court in order to provide you with the needed financing.
In order to ask the court for permission you must first obtain a sample of the car loan terms and then file a motion with the court asking for permission to acquire the new debt. The court and trustee will then weigh the benefits against the negatives that the new debt will have on you and your Chapter 13 Plan. A short hearing will then be held and if the motion is granted you will receive a court order, which you must provide to your lender. This order is what will allow you to acquire the new debt.
Remember, you can always buy a new car with cash, but if you do not have that luxury and need to finance a new car, contact the Law Office of David M. Goldman, PLLC today to help you navigate the process of obtaining a car loan while still in your Chapter 13 Bankruptcy.