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Incurring New Debt During Your Chapter 13 Bankruptcy

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If, when examining your credit card debts, mortgages payments or other loans, you find you are in arrears, but also have regular income to catch up with those back payments (just not all at one time), you may find that Chapter 13 bankruptcy is your best first step in protecting your biggest assets and income. As such, filing a Chapter 13 bankruptcy stops creditor harassment and restructures your debt into a more manageable payment plan—allowing debtors like you to pay back what they owe over time, often at a percentage of the cost.

But what if you find yourself facing new debt following the establishment of your Chapter 13 plan?

For example, what if you are a bankruptcy client who is paying a court-approved Chapter 13 plan. The plan includes payments on a car lease that you’d had for some time. Recently, you realize your car lease will expire in the next couple of months, and instead of renewing another lease or losing your access to a vehicle altogether, you decide you want to turn the car in, and, in turn, purchase an inexpensive replacement vehicle.

As a general rule, a Chapter 13 debtor cannot take on any new debts during a Chapter 13 plan without prior permission from the bankruptcy court. Depending on your jurisdiction, this approval may require a "second look" at your finances to see what has changed, and to see if you can really afford the new debt. This all takes time, and you should be prepared for delays in the approval process.

While filing for Chapter 13 bankruptcy can be a good first step in getting back on your financial feet, Chapter 13 cases can be complicated. As such, when contemplating bankruptcy, it’s also important to follow some basic steps.

Talk to an Experienced Attorney. A bankruptcy lawyer like the experience attorneys at The Law Offices of John T. Orcutt can not only help you figure out whether bankruptcy makes sense in your case, but also keep you updated on the latest in your Chapter 13 plan.

Be Proactive. When considering a personal bankruptcy, move quickly and take proactive measures to save what you can; staying quiet when you have questions or concerns will get nothing done. Speak up early and often to learn as much as you can about your fiscal health.

Get Educated. John T. Orcutt’s Bankruptcy Blog (“Bankruptcy and Your Passage Into and Out of Debt”) offers a wealth of information on the benefits of bankruptcy. Educating yourself about both will help you prepare for your financial future.

Take Charge Today! For more information regarding mortgagor benefits of bankruptcy filing, visit The Law Offices of John T. Orcutt’s “Things to See and Hear” information.

Sanford bankruptcy attorneys. Fayetteville North Carolina bankruptcy attorneys.

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