There are many times when misfortune keeps on entering your life. Lawyers of Los Angeles based bankruptcy law firm https://recoverylawgroup.com/discuss a case where a couple who was in a 5 year Chapter 13 bankruptcy plan had the misfortune of losing their car to fire. Though the insurance declared it a total loss and offered them $13,000; buying a new car while in their 3rd year of bankruptcy can be a big dilemma.
In case there was no money owed on the vehicle, it is easier for the owners. However, if some money is owed then you need to pay the lender the remaining money before you can get any of the insurance money. before buying a car, it is important to know whether cash will be sufficient, or you will need additional finances. The various options available in this situation include:
- In case you have enough finance to purchase the vehicle, you can go ahead without any permission. You can opt for a used car or a brand new one if you have the resources.
- In case you will need financing for your vehicle, things might be a bit complicated. You need the bankruptcy court’s approval prior to getting the loan approval and will also need a keen lender.
- Court approval is essential before buying anything while under a bankruptcy plan. Since the approval takes 1 months’ time (processing of paperwork, giving permission for financing), it is important that you get permission before approaching any car dealer. For permission, you need to inform the court what happened to your previous car, what amount you will be spending on the new vehicle, how much finance will be done, approximate monthly payments and the effect of the proposal on your chapter 13 bankruptcy plan.
- Once you get the court order you can shop for your new car. Care should be taken to make the car dealers clear about your financial predicament (bankruptcy).
- Before signing on the dotted line, negotiate with the car dealer for not just a better price on the vehicle but also the interest rate on a car loan. Choose the best plan from those available.
- Additional car payments might affect your chapter 13 repayment plan. In case you have money to support the deal, it is good; else ask the court to modify the plan. You can opt to reduce payments being made to unsecured creditors in order to support the car payments.
- However, sometimes creditor’s payment might not be reduced. In this case, your bankruptcy schedule might have to be amended. You need to update your schedule to disclose changes in your financial situation (loss of vehicle, insurance proceed receipt, purchase of a new car).
Though there shouldn’t be any issues updating your bankruptcy schedule, however, full disclosure is the best way forward. A bankruptcy lawyer can help you with the finer nuances. In case, you haven’t hired any lawyer, you can call experienced lawyers at 888-297-6023 to discuss your case.