Can You Borrow Money While In Chapter 13 Bankruptcy?
If chapter 7 bankruptcy feels like getting a clean slate, chapter 13 bankruptcy feels more like running the gauntlet. You don’t get your debts discharged until after you complete your payment plan, which can range from three to five years. It is a lot like being obligated to make payments on your debts as you were before your bankruptcy filing, except that now you have a bankruptcy trustee meddling in your business. Your trustee’s goal is to ensure that you keep making payments. This means that, when new expenses arise, you and the bankruptcy trustee should work together to make financial decisions that will enable you to fulfill old and new obligations. Of course, the bankruptcy court does not always make this easy. Therefore, it is best to have a Miami chapter 13 bankruptcy lawyer represent you through the entire process.
Life Happens Even When You Have Already Committed to a Chapter 13 Payment Plan
To paraphrase a popular proverb, the only things in life that are certain are taxes and the fragility of the human body. No matter what else is going on, you still have to file an income tax return, and most people who qualify for chapter 13 bankruptcy are in a tax bracket where they do not get enough tax credits to walk away from the accountant’s office every spring and spend it on a much-needed replacement for an old computer, smartphone, or item of furniture. Likewise, you or someone in your family might need medical treatment at any time, and healthcare is expensive even if you have insurance.
Bankruptcy laws allow people in chapter 13 bankruptcy to take on new debt for unavoidable expenses. The most common obligations that require chapter 13 debtors to take on new debt are medical bills, taxes, and car loans. The bankruptcy court acknowledges that tax obligations are a priority, and they may be willing to lower your monthly chapter 13 payments so that you do not also fall behind on your taxes. Likewise, the court will most likely give you permission to sign up for an installment plan for a major medical or dental expense. You can also take out personal loans to enable you to make payments on your bankruptcy obligations, taxes, and household bills. When it comes to car loans, you need the bankruptcy trustee’s permission; you cannot spend and borrow beyond your means. In other words, the bankruptcy trustee can throw cold water on your plans to finance a Maserati, and you might drive away in a certified pre-owned Toyota Camry, instead.
Of course, there is some room for debate about which expenses are truly unavoidable and about how much is a reasonable amount to pay for expenses such as cars. It helps to have a bankruptcy lawyer defend your position.
Contact a South Florida Debt Lawyer About Surviving Chapter 13 Bankruptcy
A South Florida debt lawyer can help you file for chapter 13 bankruptcy, stick with your payment plan, and emerge from the experience in a better financial position. Contact Nowack & Olson, PLLC in Miami, Florida to discuss your case.