Can I Apply for a New Loan During My Chapter 13 Bankruptcy?

If you are planning to file for Chapter 13 bankruptcy in South Florida, or if you have recently had a Chapter 13 bankruptcy plan confirmed, you may have questions about what the bankruptcy process during the length of the plan will entail and how it will impact your ability to obtain a loan. In other words, you might be wondering: will I be able to apply for a new loan during my Chapter 13 bankruptcy case, during the time period in which I am making regular payments as part of my confirmed plan? Many debtors have this question if they need to purchase a new motor vehicle, are considering the possibility of buying a home, or must consider a new loan from a creditor for other reasons.

The answer is not necessarily straightforward — it depends. It may be possible to apply for and receive a new loan during a Chapter 13 case, but it will be necessary to seek and receive approval or permission from the bankruptcy court or from the Chapter 13 trustee. Our West Palm beach bankruptcy lawyers can explain.

Getting Approval from the Bankruptcy Court or Chapter 13 Trustee for Post-Petition Debt 

When you are in the midst of a Chapter 13 bankruptcy case — meaning you have already filed and have not yet received a discharge of remaining eligible debts or have not had your case closed — you cannot simply incur new debt. To be clear, regardless of whether or not you have had a repayment plan confirmed or have started making payments on your repayment plan, you may need to get permission if you want to incur any additional debt.

Typically, you will need to inform the trustee of your need to incur additional debt and explain the reason. When the trustee agrees that you do need to incur the additional debt, you will take additional steps to show you have court approval. In most jurisdictions, you must file a motion and amend your repayment plan so that the new debt is included within it.

What is Included in Post-Petition Debt? 

Generally speaking, any debt you want to incur after you have filed for Chapter 13 bankruptcy is considered post-petition debt.

This includes any new loans, such as a new vehicle loan that comes with a monthly car payment or a new mortgage.  The requirement for getting permission includes any and all types of loans . If you do need to request permission to incur additional debt, you should speak with a lawyer as soon as possible.

Contact a West Palm Beach Bankruptcy Lawyer Today 

Whether you are considering a Chapter 13 bankruptcy filing or you recently filed on your own and need assistance with your case, one of the experienced West Palm Beach bankruptcy attorneys at Kelley, Fulton, Kaplan & Eller can begin working with you today. We can answer any questions you have about the Chapter 13 bankruptcy process in Florida, and we are here to assist you with any and all issues that may arise in your bankruptcy case. Contact us today for more information.

Sources:

law.cornell.edu/uscode/text/11

uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics