Borrowing Money While in Bankruptcy

First, it is possible to borrow money while you are in Chapter 13. Shocked? Most of my clients are when I first tell them this. Yet, every month we have clients buying new and newer cars/trucks and houses while they are still in bankruptcy. It requires some planning but we do it every month. As a general rule, it is hard to borrow money when you are in your case, but just last week we did some motions for several clients to buy cars/trucks at very good interest rates -- under 8%.
So, how did they do it? First, you have to believe that it is possible. Clients are not bad people or even bad credit risks just because they are in bankruptcy. Many clients just need a little time to get back on their feet. When I was at the CLE in Florida this summer I talked to a mortgage lender who lends to Chapter 13 debtors to help them buy out of their case by refinancing their mortgages. This is not for everyone. But it is the right thing for some people. Check with your attorney (if you are my client schedule an appointment) to see if it is right for you.
To borrow enough money to buy a car/truck are house, in Western District of Missouri and Kansas - Kansas City Bankruptcy Courts we have to have all of the facts for the court -- what they want to buy, how much money is the sales price and how much money is the loan, the interest rate, the monthly payment amount, and the number of months of payments. We put this all in a motion and put the issue before the court. We may ask the Court to rule on the matter without having a hearing. We do this all the time and only a few times do we have to have a hearing.
With my client's permission, I want to tell you about what happened to a client this year. They were in Chapter 13, and they needed to buy a different car/truck. So, they go to the car dealership and pick one out. They tell everyone that they are in bankruptcy and they need to contact their attorney and get permission to borrow. The car dealership tells them at they are wrong. Many of my clients in Missouri get out their trustee's book and see that it says that they need permission and they call us. Good job! My clients call me and they say that man (Mr. Fink, the chapter 13 Trustee( told them at the 341 meeting (meeting of creditors) that they needed to contact their attorney and get an order from the Court. But the car dealerships don't all know anything about bankruptcy. Many of them believe that all my clients need is a note from the Trustee. Well, there is no note to borrow large amounts of funds available from the Trustee's office. (Some amounts may be approved by some Trustees, but not enough to buy a new car or a house.) It takes a court order. We get the Court Orders from a Judge. It requires a motion and maybe a hearing before the court. I have been told by my clients that the car dealerships told them that we were not very good attorneys if we could not get the letter from the Trustee's office to borrow amounts like $10,000. Well, if it could be done we would be doing that. It is faster than drafting the motions and seeking court approval.
Back to my story, in the end the car dealership conceded that they were wrong and it took a court order for my clients to borrow money. This is because the finance companies wanted either an order or a discharge from my clients. So, for all of my clients -- call us and we will work to get you an order to get that new or newer car/truck or a house.

Bye for now,
Susan