It takes roughly three to five years to complete a Chapter 13 bankruptcy in Florida. During this time, your car may develop problems that may be more expensive to repair than just getting or leasing a new one. The good thing is that a bankruptcy judge may allow you to get a loan for a new vehicle while in Chapter 13 bankruptcy.
Chapter 13 rules
The general rule of Chapter 13 bankruptcy is that you can’t add more debts to your repayment plan (except for medical emergencies) after the court’s approval. Your trustee’s goal is to ensure you clear off what you owe within the agreed period. So, it’s common for them to ask the judge to dismiss any new loans if they believe you’ll spend too much, interfering with the repayment plan.
Getting a car loan during Chapter 13
Although it may seem difficult, you can get a car loan while still in Chapter 13 bankruptcy. You need to seek permission from the court by filing a motion that outlines your reasons for wanting the new loan and how you intend to pay for it.
Your trustee must also approve your motion before the court considers it. Chances are that they can’t allow you to get a luxury vehicle that would cost more than $500 monthly in payment. Also, the court won’t approve if you’ve defaulted on previous car loans or have a poor credit score.
The cramdown rule
If you purchased your current car more than two and a half years before filing for bankruptcy, you can take advantage of the cramdown rule. This rule allows you to reduce the amount you owe on your car loan to its current market value and pay it off within your repayment plan period. This way, you’ll save a lot of money in interest payments.
While it may seem counterintuitive to incur additional debt during bankruptcy, securing a car loan can provide a much-needed lifeline for transportation for work or essential services. The key is to pursue this path responsibly, keeping your proposed repayment plan realistic and within your means.