Lefkovitz & Lefkovitz
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How to incur new debt during a Chapter 13 case

Tennessee residents and others who have filed for Chapter 13 bankruptcy may be allowed to incur new debt while their cases are ongoing. However, debtors must get a court's permission to do so. Failure to do so could result in a case being thrown out and the vehicle being repossessed. There is also a possibility that a debtor could be sued by his or her creditors.

Individuals who are looking to get car loans while their Chapter 13 cases are still open will first find a dealer that is willing to work with them. The finance manager or another dealer representative will create an order sheet that lists information such as the loan's term, interest rate and monthly payment. The order sheet should list the vehicle that the debtor wants to purchase as well as the words "or similar."

This makes it easier to purchase another similarly priced vehicle if the one listed on the order sheet is sold prior to obtaining court approval. After this document is created, it will be shown to the trustee for approval. If the trustee believes that the request to incur debt is reasonable, a motion to incur debt will be filed with the court and a borrower's creditors. Assuming that the motion is approved, a debtor can return to the dealer and complete the transaction.

Those who are seeking a fresh financial start may be able to receive it by filing for bankruptcy. Once a bankruptcy petition has been filed, debtors generally receive an automatic stay of creditor contact. This means that creditors generally can't call a debtor or take action to repossess property. In a Chapter 13 case, a debtor may be able to keep property as he or she makes plan payments in a timely manner.

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