I frequently meet with debtors who tell me that they are thinking about filing for bankruptcy, but have concerns since they may need a new car in the near future. I am usually asked if a new car or used car should be purchased prior to filing for bankruptcy protection. As a bankruptcy lawyer, the current status of the law prevents me from counseling debtors from acquiring more debt prior to filing for bankruptcy. However, if I were in the debtor’s position, I would consider the following.
First, if you planning to file Chapter 7 bankruptcy, and you will need a different car, you should buy the car since it is easier to buy a car prior to filing for bankruptcy, assuming that your credit allows it. If the car is financed, the loan will have to be reaffirmed, and assuming that the amount of equity does not exceed you New York exemption for a vehicle, you will be able to keep your vehicle. At the same time, a financed vehicle on your credit report will help you rebuild credit after filing for bankruptcy.
If you are filing for Chapter 13 bankruptcy, and decide to buy the car before filing, you will be able to keep the car and payments on the loan will be a part of your repayment plan. If anything, since in Chapter 13 bankruptcy the bankruptcy court allows only a certain amount of interest to be paid on secured loans, it is possible that your monthly payments may be reduced. The situation becomes more complicated if the debtor suddenly needs a car after filing Chapter 13 bankruptcy. In order to obtain new debt, the debtor would need the bankruptcy’s court’s permission to take on a car loan. This is likely to require a motion to amend the plan that was previously approved by the bankruptcy court. If the court approves the purchase, that may change the monthly payments made by the debtor. A potential benefit to the debtor is that if the payments are made on time, this is likely to improve debtor’s credit.
If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.