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new car during Chap 13

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Anonymous
Not applicable

new car during Chap 13

How difficult will it be to get a new car while in a chap 13? we have a 60 month plan and are 18 months into it. since going into the plan our financial standing has improved quite a bit and my husbnd and i are now making 100k+ and have not taken on any new debt. problem is my husband has a sales position and his company pays us monthly  for the use of our car, but also has tight restrictions on our vehicle. they state that our vehicle cannot be over 3 years old and must have a value of over 22k. our vehicle is now 4 years old and they are on our case to replace it. we don't have 22k to buy a car out right. what's the procedure on this? 
Message 1 of 5
4 REPLIES 4
Uniqua
Established Contributor

Re: new car during Chap 13

Unfortunately, Erica79, obtaining a new car loan while in Ch 13 BK will prove to be extremely difficult. Only sub-prime lenders may even give it a thought, but I'd stay away from them because the high interest fees will simply not be worth it. Also, you are not allowed to obtain any new credit without first going back to BK court and getting permission from the trustee. Your attorney would have to file the paperwork for you. If you obtain a new car loan without permission and the BK court finds out, you may have your Ch 13 BK dismissed and all your creditors can start coming after you for past debt. This will hurt your CR even more. Also, going back to court for this approval may also show the court that you can pay some of the debt originally discharged, or more on the debt you are repaying so be careful. The more money you have, the more money the court will try to get from you.

Be smart, go and get the approval from BK court, then start looking for a new car loan. Just be prepared to be offered excessively high interest rates, if you are offered any thing at all. I tried and it proved to be way too difficult and way out of my budget.

P.S., Has your husband notified his company that he cannot take on any new debt per court's orders?

Message Edited by Uniqua on 04-27-2008 06:44 AM
Message 2 of 5
Anonymous
Not applicable

Re: new car during Chap 13

This is proving to be tougher than i thought! unfortunately our bankruptcy attorn wasn't the best at explaining ANYTHING. no, we haven't talked to his employer, frankly we didn't want to tell them about it and certainly didn't want to take any chances of him possibly losing his job since we couldn't keep up with their requirements. i'd hate to open up a can of worms in the BK court and have to start taking even more money! again, thanks for your help!
Message 3 of 5
Uniqua
Established Contributor

Re: new car during Chap 13

Erica79, don't be discouraged. I just wanted to honestly let you know what the possible outcome could be from not obtaining permission, or getting the permission yet paying high interest fees for the new car loan. The BK court doesn't automatically say "no" to asking for permission to obtain a new car loan. You need to show them why you need it and how you can afford to pay for it. If you are trading in your present vehicle, this may be to your benefit. Weigh the BB value of the vehicle versus your down payment. If the BB value is good and you don't owe more than it is worth, and you can put at least $2,000 - $2,500 down on the new car, you may get an interest rate that is affordable.

I've seen people go back to court and get this permission because the amount of money they were spending to repair their vehicle was costing more than keeping it. They actually got permission from the BK court to buy a new car.

Call your attorney tomorrow morning and tell him/her that you need to go back to BK court ASAP to obtain this approval. If/when you obtain it, you will need to bring it with you to the dealership(s) so that when you are loan searching, lenders won't shy away from you because the Ch 13 BK has not been discharged. You WILL HAVE to show them proof that you got permission to obtain a new loan.

Again, don't be discouraged. Do what you need to do right away. In the meantime, don't take on any more credit. Hopefully, your new CC won't show up on your CR before you have to go back to BK court to get this permission from the trustee. So, DO IT NOW!

Best of luck!
Message 4 of 5
Anonymous
Not applicable

Re: new car during Chap 13

Thank you so much for all your help! hopefully it'll all work out in our favor!
Message 5 of 5
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