In this article, we’ll discuss the important topic of: “What If I Buy a Car While Under Chapter 13 Without Trustee Permission?”
Chapter 13 bankruptcy is an extremely debt relieving tool, which is in a lot of sense better than Chapter 7 bankruptcy. Unlike in chapter 7 bankruptcy, it lasts longer, up to 3-5 years. It lasts longs to give the debtor a reasonable period to overcome the bad debts and come out of bankruptcy.
Understand that the time duration is long, and there can be financial changes in your life during this period. Chapter 13 bankruptcy has the exact details of what needs to be done when such changes occur. Suppose your income grows significantly and changes your financial condition. In that case, you can either opt-out of bankruptcy voluntarily, close this case and file a new lawsuit, or you can convert the case to Chapter 7.
But no matter what, you will have to keep your trustees, attorney, and the court involved in tiny decisions you take. In this article, we will further discuss what happens if you do not abide by the rules.
What If I Buy a Car While Under Chapter 13 Without Trustee Permission?
Bankruptcy is very critical in terms of following the rules and laws. If you want to buy a car without informing the trustees, God forbid the trustees to find out about your recent purchase. The trustees have every right to ask you to surrender the vehicle, and they can also dismiss your bankruptcy, which will stay as incomplete.
Most lenders who usually do not run a credit check before lending you some amount but get a document signed, which says that you are not part of any bankruptcy right now.
However, you can request your trustees to file a motion to get a car loan approved by the court, and then you can buy your car, even during bankruptcy.
Consequences of Not Following the Rules of Bankruptcy
If you are found an offender of the law, there can be a series of consequences–
Dismissal of The Bankruptcy Case
The bankruptcy court can decide to dismiss a case on its grounds or complaints from the trustees and creditors. The judge can choose to impose a ban on future filing of the bankruptcy case for the debtor for some time or even permanently in extreme cases. This is a common punishment for debtors who repeatedly fail to pay the creditors and file for dismissal.
Denial of Discharge
When the bankruptcy court decides to dismiss your bankruptcy discharge, the creditors get the power to collect the debts again from you directly. The discharge of bankruptcy could have wiped out some of the debts that were over-burdening the debtors, but the denial of the discharge will make it difficult for the debtor to meet the needs.
The judge has the power to charge any concerned party contempt of court and can exercise power to impose restrictions. For example, if the creditors are found contempt of court, the judge can deny any further claims from the creditor and ensure to prohibit him from filing any claims in the future. Other significant consequences include unable to vote or travel outside of the country or apply for some job.
How Can I Buy a Car While in Chapter 13?
Do you want to buy a new car during chapter 13 bankruptcy? Let us tell you that it is challenging yet possible. But for that, you will have to find out a lender who will agree to work with your despite you being inactive chapter 13 bankruptcy. By now, we already know that no one can get new debts while in Chapter 13, bankruptcy without the bankruptcy court’s permission.
And to get permission, there will be a meeting with all creditors, trustees, and the debtor. The trustees can agree or not to your request for buying a new car, while your lawyer will try and convince the judge how important it is for you to get this new vehicle. To make the judge decide in your favor, you must present an acceptable reason to buy the new car in an active chapter 13 bankruptcy case. It usually takes 30-45 days to complete the process.
Suppose you have figured out the proper proposed payment. In that case, the interest rates are reasonable, and the total amount is not too high; most bankruptcy courts approve the request if you do not have alternative transportation.
It will be considered fraud if you do not inform your bankruptcy case’s trustees before buying a car. And that can also lead you to severe consequences as it also implies breaking the law. You can be tempted to take such a step, but this can lead you to a series of negative impacts, including being charged a hefty fine or even imprisonment.
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