Most things are simpler after a debtor files Chapter 13 bankruptcy. The creditors stop calling, the debtors no longer have to fear that their vehicle will be repossessed or home foreclosed, and their credit slowly starts to improve because they have established a budget and are able to pay their bills on time. Life in Chapter 13 bankruptcy isn’t perfect, but for most people it is an improvement over life before filing.
When I say that it isn’t perfect, one minor inconvenience comes to mind. Chapter 13 bankruptcy debtors must get the court’s permission before incurring new debt. This means that if the debtor wishes to purchase a new vehicle they must file a motion to incur new debt with the court. The reason for requiring court permission is so the court can confirm that the debtor can afford the monthly payment and that the additional expense will not affect the debtor’s ability to pay their other creditors included in the plan.
This process takes approximately fourteen days and there are attorney’s fees for filing these types of motions. In North Texas, the court will usually allow the debtor to apply for a loan with a $450 monthly payment and $18,000 financed assuming they can afford the payment. These amounts may be different depending on local rules of court or the Chapter 13 trustee’s policy. If the debtor is repaying all allowed creditors in the Chapter 13 plan, and has more than enough income to make the plan payments, then the court will likely approve a higher monthly expense.