Adding Post-Petition Debt to a Chapter 13 Bankruptcy
A debtor can add a post-petition debt in a Chapter 13 Bankruptcy case under certain circumstances. To get started, he or she must get the bankruptcy trustee’s consent before incurring the new debt. Next, the post-petition creditor must accept its addition to the debtor’s Chapter 13 repayment strategy. The debtor must then get approval from the court.
The Bankruptcy Trustee’s Consent
Before incurring debt, a debtor must obtain the trustee’s approval. He or she must demonstrate to the trustee that the new consumer debt is essential to the bankruptcy plan completion. Taking a loan for a car to facilitate smooth transportation to and from work is a perfect example. The bankruptcy court will decline a request to add a post-petition debt to a Chapter 13 bankruptcy if the debtor creates a new debt without getting the consent of the trustee.
Courts, however, know that there are circumstances under which a debtor may incur new debt without obtaining trustee consent. For instance, obtaining prior consent for unanticipated medical fees and tax bills isn’t possible. The bankruptcy court will consider the context of the new consumer debt and may accept a request to incorporate the debt into the bankruptcy repayment plan, even if the debtor didn’t obtain the trustee’s prior consent.
Post-Petition Creditor Approval
In addition to the trustee’s approval, the debtor must also obtain the post-petition creditor’s consent before a new debt is added to his or her Chapter 13 bankruptcy payment plan. The creditor files a proof of claim as evidence of consent. Filing a proof of claim can only be done by the creditor.
Once both the trustee and post-petition creditor have approved the addition of new debt to the debtor’s bankruptcy plan, getting court approval is just a formality. The debtor must revise his or her repayment plan to include the debt.
Converting a Bankruptcy
An unanticipated life event, such as the birth of a child, job loss, death of a spouse, or severe illness, may make it hard for a debtor to fulfill his or her Chapter 13 obligations. The debtor may reduce financial strain and settle all or a huge portion of his or her unsecured debt by converting to a Chapter 7 bankruptcy. For some people, however, a conversion might not be the best solution. Bankruptcy lawyers can review a debtor’s situation and determine whether a conversion is the best option for him or her.