A Chapter 13 bankruptcy can be as few as three (3) years if the debtor is below the median income level and as many as five (5) years if the debtor is above the median income level. Whichever time is required, it is not a short amount of time and much can happen in life during that time. For example, what do you do during a Chapter 13 bankruptcy if your vehicle needs to be replaced? If you’re like most debtors, the answer is: You might have to consider taking out a loan for a different vehicle. Keep reading to learn more about this situation.
But before you can sign for that loan, you are required to obtain permission from the bankruptcy judge. And before you can obtain permission from the bankruptcy judge, you’ll need to find a lender who’s willing to work with you and get the details of the loan.
There are several dealers in the Kansas City area to which we regularly send clients in such situations. These dealers are generally familiar with how things work while the debtor is in Chapter 13 and have lenders they work with to try to help you obtain a vehicle loan when yours needs replaced. If a lender is willing to offer a loan, what we’ll need are the terms of the loan (loan amount, annual interest rate, monthly payment amount, length of the loan, etc.) and the details about the vehicle (year, make, model, etc.).
We would use those details to file a “Motion to Incur Debt” … which is the way we ask the judge whether you can take out the loan to obtain the vehicle. We would need to also file amendments to your budget (Schedules I and J) to show that you can indeed afford the monthly vehicle payment and might need to amend your plan as well, especially if you had a previous vehicle that was being paid in the plan.
There is an opportunity for creditors and the trustee to object to the motion. If nobody objects, and if the judge thinks everything looks okay, then the judge would approve the motion and you are free to sign for the loan and obtain the vehicle.
As always, please contact one of our experienced bankruptcy attorneys if you have any questions about your Chapter 13 case.