How to Finance Used Cars With a Chapter 13 Bankruptcy

When a consumer files for Chapter 13 bankruptcy, he is restructuring his finances while obtaining relief from overwhelming debt. In exchange for this debt relief, the Bankruptcy Court is entitled to regulate how you spend your money while you are in active bankruptcy. Financing a new vehicle can be challenging, but it is still an attainable goal. The Court will decide what new debt, if any, you are permitted to incur, which can affect the vehicle that you purchase and the financing that you obtain.

Instructions

1

Visit the car dealership and obtain as much information as you can about the vehicle you wish to buy. Be sure to get the vehicle identification number (VIN), year, make, model, price, interest rate and all finance information. Take several pictures of the vehicle.

2

Compare the finance information with your current bankruptcy schedules to ensure that the vehicle is affordable. Your schedules are a snapshot of your financial status, and may need to be adjusted to reflect financial or asset changes. Make any necessary changes to your schedules before you request permission from the court to purchase a vehicle.

3

File a "Motion to Purchase a Vehicle" with the Bankruptcy Court. A motion is a type of legal document that asks the court permission to do something. In some bankruptcy courts, this motion may be captioned, "Motion to Incur New Debt". Be sure to specify why you need to purchase a vehicle, and how the additional costs will be covered in your Chapter 13 plan. This is an acceptable request to make if your family size has changed or if your old vehicle is unreliable or no longer functioning.

4

Respond to any questions or filings from the Trustee, who may object to your motion. Once the Trustee has provided his input, the matter will be set for a hearing. At the hearing, you will need all of your paperwork to show the Judge what you would like to purchase, and the financial impact it will have on you.

5

Bring the court minute entry from the hearing to the car dealership, so that it can be submitted to the finance company. The minute entry may have stipulations regarding interest rate or final cost of the vehicle that the finance company will have to adhere to. This can save you money in the long run.