Buying a new vehicle during a Chapter 13 bankruptcy is possible, but you need to make sure that you have a plan, and patience.
The approval process when you are in the middle of a Chapter 13 repayment plan will take longer than your typical car purchase. This is because you will need to not only get approval from the dealer, but also approval from the court to incur new debt. And this process may take 30 days or more.
Because of the time frame, there can be issues with your vehicle selection since it is risky for dealers to hold on to inventory, as there is a chance that you will not be approved for the purchase by the court.
The Chapter 13 Car Purchase Process
The initial process will begin as it would for any car buyer. To start, you visit a dealer that has expertise in working with car buyers in a Chapter 13. Next, you should get a sample financing statement from the dealer that has the loan terms (the length of the loan, interest rate and monthly payment) and the information on the car you want. While at the dealer, keep these two crucial things in mind in order to get off to a smooth start:
- Vehicle choice. The sample contract will only allow you to purchase a specific car, truck or SUV. Because of the length of time involved, there is a good chance that the chosen car will not be available once the court approval is complete. In order to avoid any issues, be sure that the dealer notes "Or Similar" next to the vehicle choice. This will make it easier to choose another vehicle that still meets the requirements of the court.
- Have the dealer list the highest interest rate possible on the sample contract. Since interest rates fluctuate, it may change after 30 days, and if it is higher than originally listed, it will render the whole deal invalid. Having the maximum rate listed will insure that you do not have to start over again from scratch.
These two things will help you save as much time as possible. Once you have these details noted, it is time to go to your court trustee.
- You will complete the Chapter 13 trustee's paperwork, and the trustee will then weigh your ability to incur new debt against how much it will affect what you will now be able to repay to your existing creditors. Be sure to choose a modest, inexpensive vehicle, as your request will likely be denied if you are trying to purchase a high-end luxury vehicle.
- Next, the trustee will file a petition with the court for you to incur additional debt. This motion will be sent to your creditors and any other interested parties. Following this, you may need to attend a brief court hearing explaining further why you need the car. However, if no one objects to the petition, you may not need a hearing at all.
- If the petition is approved, you will present a copy of the court's order to the lender. Then you can complete the approval process with them. Be sure to follow these procedures. If not, you could have your chapter 13 plan dismissed, and you will have even more debt to deal with.
Getting the Process Started
At Auto Credit Express, we connect car buyers involved in unique credit situations, such as Chapter 13 repayment plans, with the qualified experts who can help. Save even more time by completing our fast, secure and obligation-free application today in order to quickly get back on the road.