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Buying just after filing

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  • Buying just after filing

    There is a new car lot near me that advertises that they can you approve you for a car while in bankruptcy. My question is will I get in trouble doing that and will the court trustee find out I financed a car.

  • #2
    If you are in a Chapter 13 Bankruptcy you must receive permission of the court to incur new debt. Some Confirmation Orders will contain a clause that allows the debtor to incur debt up to $5,000 (most confirmation orders have no such clause). The purpose of forcing a Chapter 13 debtor to seek permission comes form the responsibility of the Trustee to make sure that the debtor keeps up with their plan payment.

    It is neither impossible nor uncommon for debtors in a Chapter 13 to seek permission to incur debt for a car. It's quite common and most Trustees have a simple one-page form on their website to seek permission (it's all about the math).

    Do not do this without permission. Your case could be dismissed or converted as a punishment.
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Originally posted by justbroke View Post
      If you are in a Chapter 13 Bankruptcy you must receive permission of the court to incur new debt. Some Confirmation Orders will contain a clause that allows the debtor to incur debt up to $5,000 (most confirmation orders have no such clause). The purpose of forcing a Chapter 13 debtor to seek permission comes form the responsibility of the Trustee to make sure that the debtor keeps up with their plan payment.

      It is neither impossible nor uncommon for debtors in a Chapter 13 to seek permission to incur debt for a car. It's quite common and most Trustees have a simple one-page form on their website to seek permission (it's all about the math).

      Do not do this without permission. Your case could be dismissed or converted as a punishment.

      this would be a chapter 7

      Comment


      • #4
        For Chapter 7, technically there is no issue... but... you should wait at least until the case is discharged. Some of those places will not actually give a loan for a car when you're in an "active" bankruptcy. After your 341 Meeting, the (panel) Trustee doesn't care much about your case and certainly is not checking up on you. Having wrote that, many creditors would nevertheless require permission from the Trustee to issue a car loan in an active bankruptcy.

        Is there an urgent need for a vehicle before your case is discharged?
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          the car lot i talked to said he has three banks that will approve me in active bk. my car that im letting go back is our family car so i will need a new car right away.

          Comment


          • #6
            Many car dealerships will say anything to get a sale. Traditionally, you can be approved for a car loan in an active Chapter 13 bankruptcy... with Chapter 13 Trustee approval. I do not know how banks handle someone in an active pre-discharge Chapter 7 bankruptcy but I suspect that many would not take such a chance until, at least, you are past the 341 and/or discharge. Usually, purchasing a vehicle before discharge in any Chapter of bankruptcy, requires approval from the Trustee. (The discharge doesn't close the case and the case is still active at that point. However, the debtor is discharged from their prior debt upon entry of the discharge.)

            If I could wait, I would wait for several reasons. First, you'll get another score bump once the discharge hits your credit reports. Second, you'll have better odds of any automobile loan actually closing. And finally, chomping at the bit to incur new debt while you haven't even yet discharged the old debt seems antithetical to me. (Not that I didn't refinance my vehicle 6 months after my Chapter 7 discharge was entered. I waited for my scores to improve so I had a better interest rate.).

            Trust me, you'll receive all kinds of offers for cars once your discharge is entered. Your mailbox will be filled each and every day with these offers.

            Now, back to my original response. You should wait until at least the discharge before you incur any new debt.

            (Hypothetically, if I were a Trustee in a Chapter 7 case and the debtor wanted to buy a car right after filing, I'd be very interested in where the money from the down payment was coming, and what exemptions were used. If a lender is willing to give you a loan to purchase a car prior to discharge, they do it at their own peril because they are not assured of an actual discharge in the pending Chapter 7. If that case fell through, you could then refile and give the lender the vehicle and discharge the loan. Very risky business and will probably be reflected in the APR that you receive.)
            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              OP, have you actually filed yet? Previous posts say you were planning on mid-February.

              We got *tons* of offers -- some (many, actually) from well-known, legit dealers in the area... RIGHT after filing. Not after discharge. And we were free to get a loan with any of them, at any time, according to our attorney. If we had chosen not to reaffirm our vehicles with the credit union, this is exactly what we would have had to do. We would not have waited until after discharge. They can come get the vehicles at any point after discharge, and our family can't go without two cars -- let alone without any cars. Just not feasible.

              Comment


              • #8
                no i have not filled yet i will after i file my taxes. the truck i have i am reaffirming but i need a second car for my wife.

                Comment


                • #9
                  If you do not have to reaffirm the truck, the general consensus here is to NOT reaffirm it. If you belong to a CU like we do, you may have to, like we did. Not reaffirming it protects you if something happens that, God forbid, you aren't able to make the payments, or the vehicle is totaled. In that case, you don't want to be stuck continuing to make payments on a truck that no longer exists.

                  Good wishes to you.~~
                  "To go bravely forward is to invite a miracle."

                  "Worry is the darkroom where negatives are formed."

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