What If I Need A New Car While I Am In A Chapter 13 Bankruptcy?

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Car Keys | New Vehicle in Chapter 13 BankruptcyMany times during a Chapter 13 bankruptcy the debtor will need to purchase a new vehicle.  A Chapter 13 is usually between three to five years in length.  During this time, it is common for a vehicle to begin having mechanical problems and sometimes need to be replaced with another, newer, vehicle. Should you need to purchase or replace a vehicle while you a?re in a Chapter 13 bankruptcy, it is very important  you contact your bankruptcy attorney in advance so that he or she can discuss the process with you.

In the event you need to purchase or replace a vehicle while you? are in a Chapter 13 bankruptcy, you will need to obtain approval to incur debt from the Chapter 13 Trustee and/or Court.

Request for Credit Authorization for the Bankruptcy Trustee

This is done by submitting a Request for Credit Authorization to the Trustee. The Bankruptcy Court permits the Trustee to approve credit authorization requests up to a certain loan amount (the maximum loan amount varies depending on the state and district your bankruptcy case was filed.) Your attorney will provide you with the information and necessary forms needed in order for you to obtain approval from the Trustee. In addition to completing a Request for Credit Authorization form, you will also be required to amend your budget.

Motion to Incur Debt with the Bankruptcy Court

If you are trying to obtain above a certain amount of debt to purchase a vehicle then must obtain permission from the bankruptcy court. To file a Motion to Incur Debt you need to communicate with your bankruptcy attorney and ensure they have the information they need to appropriately file the motion. Usually your attorney will need to know the amount you are looking to finance, the interest rate on the loan, the monthly payment and the time period you will be paying the loan back for.

A few important things for you to keep in mind should you need to obtain credit authorization approval from the Trustee or file a Motion to Incur Debt with the bankruptcy court is that he/she will be checking to see if you are current on your Chapter 13 plan payments and will be reviewing your amended budget to see if you can afford the new car and have the ability to make the new vehicle payments. You also will need to show having a new(er) vehicle is important to the success of your Chapter 13 plan. If the financing you are seeking to obtain for new vehicle within a Chapter 13 bankruptcy is reasonable then the Trustee or courts will almost always approve your financing request. Your bankruptcy lawyer can help walk you through the process of obtaining financing for a new vehicle.

Can I File Bankruptcy Even If I Have A Job?

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Of course!  The court does not expect everyone who files bankruptcy to be down, out, and unemployed.  That’s just not how life works; our clients are good hard working people who have simply fallen on hard times. You may have a job and file a bankruptcy and in most cases unless you have signed something stating that the employer must be notified if you file a bankruptcy, your employer wouldn’t have a clue you even filed.

Male on White BackgroundIn your petition you are required to report your income in several different areas.  You will have to show your earnings for the past two years, where you work now and what your expected income going forward as well as what you have earned in the past 6 months prior to filing the bankruptcy. In bankruptcy, your income is calculated based upon a “Means Test”; although there are many other types of income besides employment that are also a factor in the means test.  This tells the court whether or not you qualify for a Chapter 7 bankruptcy or if you will need to file a Chapter 13 bankruptcy based upon your income.

In the event that you file a Chapter 13 bankruptcy your debts are a factor, but your plan payments will be based also largely upon your past 6 months of income.  For example, let’s say that based upon your arrears and debt in the plan, you’re looking at plan payments of $500 per month, BUT based upon your prior 6 months, your income shows that you have an extra $1,000 left over each month.  You would make a payment closer to the $1,000 mark because your prior income states that you can afford it.

Also, in the occurrence that you file a bankruptcy and you have any secured items in which you may wish to keep (such as a house, car, jewelry, furniture, or electronics) you must be able to show that you can afford to make the contractual monthly payments.  The court will not allow you to file a Chapter 7 bankruptcy unemployed and still keep your home unless you can show you are getting income from another source (like family support) to show you can afford the monthly payment.  Bankruptcy court has been enacted to help consumers. Whether you have a job or not does have an impact on your bankruptcy options but you can certainly still file a bankruptcy even if you do not have a job.

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Can I Collect Rent If I’m Surrendering Rental Property in Bankruptcy?

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Person Writing on LaptopRental properties can be a great source of income until a renter moves without notice or fails to pay or that rental income starts to be used for your personal household expenses.  As situations arise, many people are finding it necessary to file bankruptcy and surrender the extra properties and the mortgages that come along with those properties.  When you surrender a rental property in bankruptcy, you are in essence surrendering your interests and rights to the property.  Therefore, you are not eligible to collect rent while in bankruptcy.

Additionally, the bankruptcy Trustee sees this as unprotected funds and will request the received funds to go to the creditors.  Furthermore, tenants are always informed if a house is being surrendered in bankruptcy.  Your tenants may be well aware of their rights and have the responsibility to report a debtor who tries to collect rental income while in bankruptcy.

Once you have been discharged of your debts and have received a final decree that officially closes your case, you may begin to receive rental income.  However, approach this scenario with caution.  Even though you have completed your bankruptcy the Trustee has the ability to reopen your case and require you to pay him all the funds you had received after your discharge.  So, you definitely need to weigh your pros and cons.  If this situation sits in your future horizon, you should discuss this with your bankruptcy attorney prior to your discharge.  Moreover, if the tenants are aware of the circumstances, they may not even be willing to pay rent while still living in the home.  Since the property is still in your name until the bank forecloses, you may engage in the eviction process.  Or you could insist on the tenants paying enough to cover homeowners insurance or property taxes.  If there is a homeowners’ association linked to the home, whoever lives in the property should stay current with the HOA.

We typically tell our clients to stop collecting rent when they decide to file for bankruptcy. Instead, the tenants should pay rent to the bankruptcy Trustee or stop paying rent all together if they no longer wish to stay in the house. This ensures the bankruptcy client is not doing anything to jeopardize the success of their bankruptcy.

Do Credit Repair Services (After Bankruptcy) Actually Work?

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Credit Card Companies May File a Proof of ClaimIn this age of information it can be tough to discern which tasks we are capable of handling ourselves and which tasks we should leave to the professionals.  As bankruptcy lawyers we have clients who contact us on a regular basis and ask if they should hire a credit repair company to rebuild their credit. In short, we don’t think so.

In the case of repairing your credit after bankruptcy, an individual is perfectly capable of resurrecting his or her own credit score.  Research is all what it comes down to and having the time to fill out forms and make certain phone calls.  Six months after filing, we suggest pulling your credit report from all three credit bureaus: Equifax, Experian and TransUnion (you can pull your credit report for free once a year by going here).  You should examine these reports to make sure all debts listed in your petition have been discharged through your bankruptcy.  If a credit or collection agency has failed to report correctly, it will be up to you to be your own advocate.  First, you should send, in writing, a letter to the creditor stating when you filed bankruptcy, your case number, when you were discharged from all your debt and a request that they correct the entry with all three bureaus.  Next, go to the individual credit bureaus websites and determine the process of filing a dispute against the creditor that is not reporting correctly.  If the battle continues and you need a legal hand, you should contact your bankruptcy attorney: they should be able to fax over the necessary information to clear up any matter.

If a creditor still fails to accurately report the discharge of your debts to the credit bureaus then they could be sanctioned for violating federal laws. You could also report them to the Federal Trade Commission.

As in everything, it is important to document as you communicate with these companies.  Although they are required to document as well, it is nice to have your own personal reference, especially if you are dealing with a difficult or large company.  Make sure to stand your ground and know your rights!