There are 2 different kinds of bankruptcy chapters that individuals can file, chapter 7 and chapter 13. In a chapter 7, debt is discharged with generally little to no payment to creditors, as long as you have enough exemptions to protect the value of your assets. (See the asset exemption blog post from December 6, 2021). A chapter 13 is necessary if your income is too high to qualify for a chapter 7, or if you have too many assets that are not exempt and need time to pay to keep them. Chapter 13 is generally between 3 – 5 years with monthly payments based on either income and/or asset value. It can be very beneficial in order to reorganize your debt into a payment that is feasible and reasonable.
Although a chapter 13 could help someone reorganize their debt, while also protecting them from lawsuits and creditor harassment, there are many questions that come up before filing a chapter 13. One of the main questions is about financing while in an active chapter 13. Most of my clients think they will not be able to get a new vehicle, finance an A/C unit, sell their home, etc. in a chapter 13 and are stuck for 3 – 5 years. Fortunately, this is not true.
While in a chapter 13, you can finance, and you can buy or sell assets, however, those transactions have to be approved by the trustee or the judge. What happens if you are in an active chapter 13, your vehicle is older and in constant need of repairs, and trading it in for something newer will help you financially? First, contact your attorney. If you have filed a chapter 13, it is imperative that you have at least talked to a bankruptcy attorney before filing, and better yet, hired an attorney to represent you. Your attorney will be able to tell you exactly what documents and/or information they need to request approval for financing. Generally, you will need to provide all financing information, such as the lender's name, financed amount, vehicle make and model, interest rate, payment amount, etc. The request is filed with the trustee, and if the trustee does not approve, a motion must be filed to be heard before the judge. This goes the same for all financing, as well as buying or selling assets. Once approved, the transaction can occur. If not approved, the transaction cannot be completed.
If you are considering filing bankruptcy, have concerns about whether you will qualify for a chapter 7 or will need to file a chapter 13, or have questions about bankruptcy in general, our attorneys are available for a free consultation to discuss any questions or concerns you have. Please call Holland Law Group today to speak to one of our experienced bankruptcy attorneys. Serving the Treasure Coast to the Sun Coast, we are helping Floridians recover from debt.