The Short Answer
Yes, you can purchase a vehicle while in a Chapter 13 bankruptcy, but you need court approval first. Your attorney will review your income and expenses to confirm you can afford the new payment within your existing plan. If financing is involved, your attorney files a Motion to Incur Debt, and the bankruptcy judge decides whether the purchase makes financial sense for your situation. Even if you plan to pay cash, you still need permission — and you'll need to explain where that money came from.
The short answer is yes. However, there is a bit of a process behind purchasing a vehicle in a Chapter 13. First, your budget needs to be reviewed. This requires your bankruptcy attorney to review your income and your expenses to make sure you can afford to have an extra payment in your budget. Once it has been established that you are able to make a new car payment, a request to purchase a car must be made to the Bankruptcy Court. This is done through a process called a Motion to Incur Debt.
After your bankruptcy lawyer files the Motion to Incur Debt the bankruptcy judge will evaluate your situation to make sure that you can make the monthly payments without any problems. If there are problems, they will deny your ability to get financing for the vehicle. It is the judge’s job to make sure that you do not incur new debt and end up in the same situation that caused you to file bankruptcy in the first place.
What if you plan to buy a car without financing? You will still need to obtain permission; additionally, you will need to explain where the lump sum of money came from. It is always best to discuss this possibility with your attorney first to remove any possible issues that may arise from the access of extra money.
Key Takeaways
- You must file a Motion to Incur Debt before financing a vehicle purchase during an active Chapter 13 plan.
- The bankruptcy judge will review your income and expenses to confirm the new payment fits your budget without jeopardizing your plan.
- Buying a car with cash does not skip the approval process — you still need court permission and must account for the source of those funds.
- Your attorney needs to review your budget before any steps are taken, since an unaffordable payment could put your entire plan at risk.
- If the court determines the purchase would strain your finances, the motion can be denied and you will not be able to obtain financing at that time.
Attorney Insight
The mistake I see most often is clients who go to a dealership first and come back having already agreed to financing terms — without realizing they needed court approval before that conversation even happened. That puts the whole plan in a difficult position and can delay or complicate getting the Motion to Incur Debt approved. In North Carolina, the Chapter 13 trustees scrutinize new debt carefully, and showing up with a done deal rather than a request is a red flag. Always call your attorney before you set foot on a lot.
