Purchasing A New Car During A Chapter 13
The warnings first. Any time you wish to get approved for the extension of credit for $5000 or over during a Chapter 13 you need to get court permission.
1) This means you will have to update your income, which is there has been a significant change could cause your monthly plan payment amount to increase.
2) You have to prove you have the financial ability to pay the new loan without affecting the current plan.
3) And you have to show the need for a new care is reasonable and necessary.
Avoiding The Requirement For Court Approval: If any of the above issues present a problem then we would suggest you consider not borrowing more then $4,999 on a new car to avoid the requirement of court permission and wait until your case is completed to get a “new” car.
Proceeding With A Request For Approval: If you wish to proceed with seeking the Court’s approval to incur a debt for a vehicle of $5,000 or greater, you would first find a vehicle you like and a dealership/finance company that will work with you in bankruptcy. You would get them to produce a contract showing sale amount, interest rate, vehicle type, and monthly payment. Once you provide this to your attorney, they will submit a Motion to Incur Debt to the Court. Approval will more than likely require a court hearing in front of the judge which you will have to attend. The process from the time the contract is submitted to your attorney can take approximately 45 days until approval.
Please consider carefully whether a “new” car is the best option at this time in your plan.