What Should I Do if I Really Need a Car & I'm in a Chapter 13 Bankruptcy?

Buying a car during a Chapter 13 bankruptcy is challenging but not impossible. You must convince the bankruptcy court that you should be allowed to take on more debt to finance a car Then you must find a lender willing to offer you a car on credit while you are in the middle of a bankruptcy. Together that's a tall order, but it can be done. Chapter 13 is an effective form of bankruptcy requiring you to remain on a strict budget during a payment plan lasting three to five years.

Adding More Debt

Chapter 13 requires you to seek formal permission from the bankruptcy court before choosing a car. A request to purchase a shiny brand-new car is completely out of the question. The purpose of Chapter 13 is to reduce your expenses to a modest level and use any money remaining to pay off as much debt as possible. Adding a large car payment increases your overall debt and leaves less money to pay creditors in the bankruptcy.

Court Permission

Gaining permission to buy a car through Chapter 13 requires making a request through the bankruptcy trustee assigned to your case. The trustee may challenge the request by questioning you about your need. It's likely the trustee will press you on getting your current car repaired or getting by with one car if you and a spouse filed jointly for bankruptcy.

Making the Case

There are ways to build a convincing argument for buying the car. A couple with one car could receive permission to buy a second car after the husband finds a job following months of unemployment. The couple could point to the couple's extra income as a way to pay more money to creditors -- but only if the husband can obtain reliable transportation to commute to the new job. Or if you filed for bankruptcy alone you could argue that repair bills on your present car are making it difficult for you to stay within your court-ordered budget and that you must have a more reliable car.

Reasonable Expectations

The Bankrate website reports that bankruptcy trustees are likely to approve car payments for around $250 a month, depending on your situation. Then comes the challenge of securing financing. The trustee can recommend nonprofit credit counselors who can refer you to lenders comfortable loaning money to people in bankruptcy. Or Bankrate suggests you simply call around to car dealers and tell them that you are in the middle of a bankruptcy and need a car. One or more of the dealers may offer financing, although the interest rate is likely to be exorbitant because of your bankruptcy.