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Purchasing a Vehicle During a Chapter 13 Bankruptcy

A Chapter 13 Bankruptcy lasts 3-5 years. You might need to finance the purchase of a vehicle during your Chapter 13 Bankruptcy case. Perhaps you have a high mileage vehicle that is constantly breaking down due to various mechanical issues, or your vehicle might be totaled in an accident. Your job might require you to have a vehicle below a certain year and mileage. Perhaps you are having a child and need a larger vehicle to accommodate your growing family. Do not worry, you can still get vehicle financing while in a Chapter 13 Bankruptcy. You will have to get the approval of your Trustee and the bankruptcy court, which is not a daunting as it seems.

Plan Your Purchase

First, you should check with your attorney and see what type of monthly payment you can afford. Your attorney will review your current income and expenses and let you know how a purchase will affect your current case. Your attorney will assist you in determining the monthly payment you can afford while still making your Chapter 13 plan payment. You may need to modify your Chapter 13 plan to account for the new vehicle expense.

Get a Purchase Estimate

Once you have reviewed your case with your attorney you need to shop around for a vehicle that fits your budget. You will need to look for something that is practical and affordable. Once you have found a suitable vehicle, you need to get a purchase estimate from the dealer. The purchase estimate will state the year, make and model of the vehicle as well as the purchase price and estimated monthly payment. You will use the purchase estimate to show the Trustee and the bankruptcy court the amount of debt you plan to incur.

Motion to Incur Debt

Give your purchase estimate to your attorney along with two recent paystubs. Your attorney will file a motion to incur debt with the bankruptcy court and explain why you need to purchase a replacement vehicle. Your attorney will use the purchase estimate and income information to show the bankruptcy court that the amount you wish to finance is reasonable and that you can afford the additional payment. The motion will ask that you be allowed to purchase the vehicle or something substantially similar. The “substantially similar” is used as a backup incase the vehicle you want has been sold while waiting for court approval. Once the bankruptcy court approves your motion, you can complete the process purchasing a vehicle.

Summary

Life happens while you are in a Chapter 13 Bankruptcy—vehicles break down and needs change. The bankruptcy court understands that you need a reliable vehicle to get to and from work. After all, the success of your Chapter 13 plan depends on your earning regular income to make your Chapter 13 plan payment. Do not be afraid to ask the court for permission to finance the purchase of a replacement vehicle. It is a common occurrence in Chapter 13 bankruptcy.