Can You Incur More Debt During a Chapter 13 Repayment Plan?

 Posted on December 27, 2019 in Chapter 13

If you have gotten a bankruptcy, the one thing you do not want to do is to incur more debt; being unable to pay your debt is the reason you filed for bankruptcy, right? Chapter 13 bankruptcy repayment plans usually last anywhere from three to five years, meaning you must be financially responsible during that time period or you could risk having your case dismissed and being responsible for repaying your debts in full. While it is a good rule of thumb to avoid taking on any further debts during a Chapter 13 bankruptcy, sometimes taking on more debt is unavoidable and is a necessity. Incurring new debt during your Chapter 13 repayment period is possible, but there is a certain way you must go about it.

Reasons for Incurring New Debt

Sometimes, life can be unpredictable. Even though you were probably not planning on taking on any new debts during your Chapter 13 repayment period, things can happen and can put you in a situation where there is no other option. Generally, incurring new debt during a Chapter 13 repayment period is frowned upon and is only permitted when the debt is for something that is considered a necessity. Common reasons for incurring debt during a repayment plan include:

• Refinancing a mortgage on your current home
• Purchasing a new home or a new vehicle
• Financing equipment needed for necessities, such as a new water heater or furnace

Filing a Motion to Incur Debt

Before you take on any new debt, you must speak with your bankruptcy trustee about filing a motion to incur debt. If you were to take on new debt without notifying the court or your trustee, you could risk having your bankruptcy case dismissed, leaving you in an arguably worse financial situation than before. To file a motion to incur debt with the court, you will need to provide the following information:

• Proof of income for at least the past 60 days
• An updated list of your monthly expenses
• Information about the loan and the financing company, including how much the loan is for, the interest rate of the loan, the length of the repayment period and how much the estimated monthly payment would be

The court will examine your motion and make a determination on whether or not the debt is necessary, whether or not you will be financially able to make the monthly payments and whether or not the new debt will interfere with your ongoing bankruptcy repayment plan.

Contact a San Antonio, TX Chapter 13 Bankruptcy Attorney For Assistance

Making the decision to file for bankruptcy can be a difficult one, but it can ultimately end up being the best financial decision you make for yourself. If you are currently in a Chapter 13 repayment plan, you likely know that there are limitations to what you can do with your money. If you need to incur debt during your repayment period, you need help from a Schertz, TX Chapter 13 bankruptcy lawyer. At the Law Offices of Chance M. McGhee, we can help you correctly file a motion with the bankruptcy court to allow you to take on more debt during your repayment period. Call our office today at 210-342-3400 to schedule a free consultation.

Sources:

https://www.carsdirect.com/auto-loans/what-s-an-authorization-to-incur-debt-with-a-chapter-13

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics