Can You Buy a Car While Your Chapter 13 Bankruptcy Is Still Active?

Bankruptcy courts frown on people incurring new debt while their cases are active, but they understand things happen that require petitioners to take on more bills. Thus, it's possible to purchase a vehicle while you're still paying on your chapter 13 bankruptcy, but you need to do these two things first.

Create a Car-Payment Friendly Budget

The purpose of chapter 13 bankruptcy is to make your debts more manageable. So, the trustee in your case won't even consider your request unless you can show you have enough money to cover the monthly car note, required insurance, and your plan payments. To that end, you'll need to create a new budget based on the income and expense schedules from your bankruptcy file.

Look at where your money is coming from and where it's going. If you haven't increased your income, you'll need to make adjustments to your spending categories to make room for the additional bills. However, the changes you make must be reasonable or the trustee will reject the budget proposal. For instance, you're currently claiming you spend $200 on food every week and you suddenly reduce the budget amount to $50. This will raise a red flag, and the trustee will either grill you about the issue or veto your submission.

It's a good idea to consult with your bankruptcy attorney for help with this step. The lawyer can review your current financial situation and suggest appropriate changes that can get your budget approved.

Get the Court to Sign Off on Your Plan

Once the trustee accepts your budget, they will have you fill out a motion to incur new debt. Essentially, you must tell the court why you want to buy the vehicle and verify you can afford it. It's critical the car satisfies a real and pressing need (e.g. you require transportation to work); otherwise, the court may turn down your request as frivolous.

After the trustee confirms you're current on your plan payments and that the proposed loan terms are fair and reasonable, the person will submit the motion to the court on your behalf. Depending on the court caseload, it can take a few weeks to receive a response. If the court agrees to let you get the vehicle, however, you can take the letter of approval to the dealership and get the car immediately.

As noted previously, you should consult with your bankruptcy attorney about your plan to get a car while in the midst of your bankruptcy case. The lawyer can provide sound advice and assistance that increases the chances of success. For help with your case, contact a local bankruptcy law firm.