Getting a Loan While in a Chapter 13 Bankruptcy
It is difficult for Nevadans who are in Chapter 13 bankruptcy repayment plans to get new credit, but it can be done in some cases. Most types of new debt require approval from the bankruptcy court and the trustee. People who take out new debt without getting permission from the court first may jeopardize their bankruptcy cases if they are not able to keep up with their Chapter 13 plan payments or if taking out the credit is against the bankruptcy court’s rules.
Process for Taking Out Loans During Chapter 13
People who need to purchase items on credit for their personal needs take out consumer loans. They might need new loans to replace automobiles, buy appliances, or make necessary repairs to their homes before their bankruptcy payment plans are complete. Most bankruptcy courts require that debtors who are in Chapter 13 repayment plans get approval from the courts and the trustees before they take out consumer credit. To gain approval, the debtors must obtain financing statements from the potential creditors that outline the loans’ terms and the payment amounts. They will also need to explain why they want to incur new debt. The trustee will evaluate whether taking out new loans will impact the debtors’ ability to continue making payments to their existing creditors. If it is likely that the new loans will impact the ability to repay the creditors, the trustee will typically object to the requests.
People must also file motions with the bankruptcy court asking for permission to take out the new credit. Copies of the motion must be sent to the trustee and the creditors, who can file objections. If there are not any objections, the court may grant the motions without holding hearings. If there are objections, the court may hold a hearing at which the debtors will have the opportunity to present evidence about their need to take out new credit. If the motions are granted, the debtors must give copies of the order to the creditors that will be extending them credit.
Taking Out Debt Without Permission
In most jurisdictions, taking out new debt without first getting permission from the trustee and the bankruptcy court is strictly prohibited. If people don’t get permission, their bankruptcy cases may be dismissed. It is important for debtors to check the rules in their jurisdictions and with their trustees.