Can You Purchase a Car While in Chapter 13

Wage-earner bankruptcies last up to five years. Yet the average lifespan of a new car is about eight years . Moreover, before most vehicles expire, they become so expensive to maintain that it is cheaper to buy a new one. So, unless your car just came off the dealer's lot when you file, vehicle replacement during Chapter 13 is almost inevitable.

Bankruptcy judges understand these issues. So, there is a built-in mechanism for buying a car during a Chapter 13. In other words, although there are some hoops to jump through, it's possible to borrow money for a car during bankruptcy.

An Athens bankruptcy lawyer can help your family though this process. That assistance extends beyond the legal aspects of buying a car during bankruptcy. An Athens bankruptcy attorney can also help your family with the practical aspects. So, if you need a new vehicle, you will have a reliable way to get to and from work, get the kids to and from school, and take care of other everyday items.

Buying a car during Chapter 13 is an excellent way to raise a credit score. The mere act of securing financing usually raises most scores. Then, with every on-time monthly payment, the owner's credit score usually goes up at least a few additional points.

Finding a Dealer

The dreaded "with approved credit" disclaimer discourages many people from even reaching out to car dealers while they are in bankruptcy. Truthfully, however, many lenders prefer to work with people who have poor credit, especially those who recently filed bankruptcy. Since these loans are high risk, banks can charge higher interest and make more money. Moreover, since the bankruptcy court is watching these people closely, there is a lower risk of default.

Athens bankruptcy lawyers usually have professional connections in the vehicle financing area. As such, they are usually able to connect debtors with dealers who will work with them. That referral increases the chances of approval.

Budgeting and Planning

In addition to a higher interest rate, there are some other issues for car buyers who are subject to court supervision. Many lenders require higher down payments. Additionally, the buyer's choice is often restricted to a few vehicles in stock.

The down payment and monthly payment are part of the budgeting and planning process. As for the budget, Chapter 13 debtors are usually making rather large monthly debt consolidation payments. So, they must either increase their incomes or decrease their consolidation payments in order to afford a new car during Chapter 13. Otherwise, the debtor might not be able to pay off the plan before the protected repayment period ends.

A higher income must be permanent and consistent. Seasonal employment, like a teacher's summer job, is usually insufficient. Income from a side hustle, like an Uber driver, is usually insufficient as well. Such income fluctuates too much.

A brief note about Uber and bankruptcy. Ridesharing companies no longer offer financing or leasing assistance. However, they do offer rental assistance , even for new drivers who are in bankruptcy. This option might make more sense than buying a car in some cases.

Whether or not increased income affects Schedule I, the car payment must be included in an amended Schedule J.  The new information is necessary to support a motion to incur additional debt.

Athens Bankruptcy Attorneys and Filing a Motion to Incur Debt

In addition to amended bankruptcy schedules, most judges require a financing statement before they approve motions to incur additional debt. The judge wants to make sure the additional debt does not make the Chapter 13 debt repayment plan unsustainable.

Assuming all this paperwork is in order, and the trustee does not object to the motion, many judges grant these motions without requiring hearings.

If the trustee objects or if something does not smell right ( e.g. the debtor suddenly has enough surplus income to buy a new Land Rover), at a motion hearing, most judges look at several factors. These factors include the debtor's need for a new car, the purchase price, the payment terms, and available alternatives.

Speaking of alternatives, in the unlikely event the judge denies the motion, many debtors can convert to Chapter 7 and terminate court supervision.

Get in Touch with an Astute Chapter 13 Bankruptcy Lawyer Immediately

If you were asking can you buy a car while in Chapter 13 bankruptcy, the answer is yes. Moreover, the experienced Athens bankruptcy lawyers at Morgan & Morgan, Attorneys at Law, P.C., can make it happen. Call us at (706) 843-2905 today for a free consultation.

Lee Paulk Morgan

With more than 41 years of experience in the areas of Bankruptcy, Disability, and Workers' Compensation, Lee Paulk Morgan is one of the most respected Bankruptcy and Disability attorneys in Athens, Georgia. His tireless dedication to serving clients has gained him the reputation of a premier attorney in his areas of practice, as well as the trust and respect of other legal experts, who often refer clients to him.

Can You Purchase a Car While in Chapter 13

Source: https://morganlawyers.com/can-you-buy-a-car-while-in-chapter-13-bankruptcy-athens-ga/

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