Folks who are debtors in a Chapter 13 Bankruptcy often need to borrow money from a bank, finance company or other party, while they are still in their Chapter 13 Bankruptcy. For example, their car may have broken down and they may need to borrow money to purchase another. In addition, many persons need to sell or buy or refinance property.
In these situations, the plan and the confirmation order require them to take certain steps before they can complete the loan, purchase or sale.They must obtain the court’s consent before they borrow money, unless there is an emergency situation.
The debtor must contact their attorney before they borrow money or buy or sell property. The procedure for providing notice or obtaining trustee approval may be complex and the attorney will be able to help them through it. Sometimes there are legal issues that arise from the request and the attorney may want to review these issues before the request is made. In addition, the trustee may rely on the information provided during this process to propose changes in your plan. For example, if the budget that is provided with the request to borrow money to purchase a vehicle shows that the debtor has more income, the trustee may propose that the debtor increase their plan payment. By consulting with their attorney, the debtor is more likely to learn more about the possible consequences of the request.
After the debtor has arranged for the loan, the request for court approval must be made in writing.
The court may take sometime to respond to the request. The process will move more smoothly if the debtor contacts their attorney about the request as soon as they learn about the transaction or have
discussed the loan with the bank or finance company. In addition, the court will often ask for further information before answering the request. The debtor should provide the court with as much information as possible regarding the terms of the transaction. The debtor’s attorney will be able to tell the debtor what information the court is likely to need.
In summary, the one important suggestion to keep in mind if a debtor needs to borrow money or buy or sell property while they are in bankruptcy:
See their attorney as soon as they learn that they need to borrow money or buy or sell property and work with their attorney.