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What if you need a new car during a bankruptcy?

Most people in Wisconsin need a vehicle in order to maintain a job. In a Chapter 13 bankruptcy, people will often have a vehicle that they are paying through their Chapter 13 plan. But because many Chapter 13s have a duration of five years, there are also many individuals who will have a car that needs to be replaced due to age or mechanical issues during the life of their plan.

This presents the problem of needing to take on new debt while you are in the bankruptcy and all of your income is already accounted for by your Chapter 13 plan. It is possible, but you will have to obtain the permission of the Chapter 13 trustee, who is responsible for handling the payments from your plan.

For this to work, you first have to choose a very practical vehicle. A trustee is not likely to approve the purchase of an expensive, fully loaded luxury vehicle. A reliable, potentially used, vehicle that is reasonably priced is more likely to receive approval, as it will have the least severe effect on other creditors who are currently receiving payments in your Chapter 13.

If your purchase will alter the percentage of unsecured debt being repaid, it is possible those creditors will object to your purchase. This is why you need to choose a vehicle that minimally meets your need and that you can argue to the court is reasonable and necessary to maintain your employment and allow you to continue to make payments to all of your creditors.

While bankruptcy is a common legal proceeding, many find it helpful to discuss their situation with an attorney prior to filing. Bankruptcy procedure can be complex and difficult for non-lawyers to work with and given the stress, time and expense, you want to ensure your bankruptcy succeeds the first time.

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