Can I Get A Loan During My Chapter 13?
As a consumer bankruptcy attorney, I see people everyday struggling to get back to their feet after the economy has taken its toll on their finances. Chapter 13 bankruptcy is a very effective way to reorganize your debts and force creditors to accept a manageable payback plan, often for pennies on the dollar of the debt owed. You may be saying that sounds great, and it actually is very beneficial for the debtor who files. But, as with everything there are some drawbacks. If you want to make any significant financial moves, you will need to run it by the Judge.
In Chapter 13 bankruptcy, the Bankruptcy Judge is involved in determining how bankruptcy debtors are permitted to spend their money. That means bankruptcy debtors also must ask for the Court’s approval before entering into certain financial transactions.
One of the most common mistakes a debtor can make is failing to get the bankruptcy judge’s approval prior to obtaining a loan. A chapter 13 debtor must always have his or her attorney file a request with the court prior to obtaining any loan. This includes loans from the debtor’s own 401k. The reason being is that the Court will want to make sure that there is no prejudice to the creditors, the estate or the debtor.
Chapter 13 trustees and bankruptcy judge’s are fair and reasonable. If your car breaks down, you’ll be allowed a reasonable loan for a new vehicle. If your septic system breaks down and you need a 401k loan to afford repair, you’ll likely be allowed to take the loan.
Remember, if you have a large sudden expense that requires a loan, or perhaps you decide you want to get a loan to purchase a home, let your attorney know before signing anything. They will file the motion and get the matter before the Court as quickly as possible.
This Blog was written by Attorney Jeremy Iskin, Esq. of The Dellutri Law Group, P.A. Mr. Iskin practices Bankruptcy Law, Fair Credit Reporting Act Law, Fair Debt Collection Practices Act Law and in other areas of Consumer Law.
