BUYING SOMETHING WHILE IN A CHAPTER 13 PLAN

Life always requires certain tradeoffs, for example, if you want to lose weight you cannot eat chocolate cake unless you exercise more. Chapter 13 has its own rules that you must follow if you want to be allowed to use Chapter 13 to protect your assets.

The reason that most Chapter 13 cases are filed is to protect assets so you do not lose them. Of course, sometimes you should get rid of assets that you are trying to keep. Sometimes, you need a little time before you give up an asset for reasons that you and I should discuss. Most of the time, however, a Chapter 13 is filed with the intention that assets will be kept forever.

RULES FOR BUYING SOMETHING WHILE YOU ARE IN A CHAPTER 13

PAYING CASH RULES

If you are paying cash for something and it will not cost you a lot of money to maintain it, then, no Court Order giving you permission to buy something is necessary. Just as you will be buying groceries, gas and clothes using cash without getting the permission of the Court, you can buy a new car or whatever else you need to buy.

BUYING ON CREDIT

Creditors know that persons in a Chapter 13 bankruptcy case are not allowed to borrow money without the prior approval of the Court. Your plan of reorganization or Chapter 13 Plan was approved only after you showed that you could make your payments due under the plan. A budget was presented with your expected income and expected expenses.

If you suddenly increase your expenses with a monthly payment, how can you make your Chapter 13 payment, the new bill and your living expenses? This is what you will have to show the Court before you are going to be allowed to incur more debt. Creditors know that if you are trying to borrow money while in a Chapter 13 case, you are pretty desperate. Creditors will put all kinds of charges and fees and the interest rate will invariably be very high.

Debtors will feel trapped and without a choice and will often agree to almost anything. The oversight by the Trustee and the Court may keep you from making a mistake that causes your case to be dismissed for nonpayment. If that happens, you will probably lose the very thing that caused you to file a Chapter 13 case originally.

About Nathan Davis, Esquire

Born in Charleston, South Carolina, Nathan Davis has been practicing law for many years. Mr. Davis has a wide variety of experiences having practiced domestic relations, criminal law, social security law having also practiced collection law in the past. This knowledge is helpful when someone needs to restart their financial life. The practice is now primarily bankruptcy and debtor representation work, but, Mr. Davis continues to also practice real estate law, trusts and estates and a general litigation practice. I believe that the most important part of representation is trying to leave you better off when the case is finished than when you started. Although I will do as my client directs, I will always tell you if I think that you are making a mistake. Bankruptcy is about a "fresh start". If you do not make changes in what you are doing, you will be doing what you are doing now in the future. There is no shame in bankruptcy or other steps that you may take to start your life over. Too often, people worry more about things than about themselves, their family or their future.
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