By Ryan C. Wood
When you are in an active Chapter 13 bankruptcy case there are limits to what you can or cannot do. You cannot simply continue doing what you would normally do as if you did not file for bankruptcy. There is a Chapter 13 trustee assigned to your case. This trustee is the person that is responsible for administering your Chapter 13 case. If there are certain things that you want or need to do you will need to ask the trustee or the court’s permission depending upon the circumstances and jurisdiction. To make sure you stay on track and not get in trouble with your Chapter 13 bankruptcy trustee, here are some things that bankruptcy attorneys may advise you on.
Buying a New Car
Generally you are allowed to incur new debt for the purchase of a vehicle. If the vehicle you owned at the time the case was filed breaks down or become unreliable you need a new car. Just because you filed for bankruptcy protection does not mean you cannot have reliable transportation to get to and from work and live life. You will need to notify your bankruptcy lawyer and obtain a letter from the trustee’s office providing permission to incur the new debt. This is a jurisdiction to jurisdiction issue though. So your local Chapter 13 Trustee may have different procedures in place.
You cannot have or use or open any credit cards while you are in an active Chapter 13 bankruptcy. You need to cut up all your credit cards in your possession when you file for bankruptcy. This makes sense since the Chapter 13 trustee would not be able to administer your estate effectively if they are paying your creditors from your Chapter 13 plan payments while you continue to accrue new debt.
You cannot borrow money from any sources, usually over $600, without permission from the Chapter 13 trustee. In some jurisdictions you need to obtain permission from the bankruptcy court in order to borrow money. You should consult with a bankruptcy lawyer in your area to determine whether you need permission from the Chapter 13 trustee or the bankruptcy judge to borrow money. Here are some examples: refinancing your mortgage, trying to obtain student loans, financing a car, borrowing from your 401k, borrowing funds to make home improvements. There may be many things you need to borrow money for since life continues moving on after you file your bankruptcy case. The important thing is to contact your bankruptcy attorney first before doing anything so that your attorney can advise you on what you need to do.
Selling Your Home
If you need to sell your current home you need permission from the bankruptcy court in order to do so as it is a major asset in your bankruptcy estate. Failure to obtain permission from the court to sell your home may result in having the entire transaction voided.
The above examples are only a portion of the things you cannot do or need permission in order to do while you are in bankruptcy. The best way to ensure you are not inadvertently violating any rules is to consult with your bankruptcy lawyer before doing anything major that involves your finances while you are in bankruptcy.