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Can I Buy a Car or Refinance While Declaring Bankruptcy?

June 09, 2017 |

In general, bankruptcy debtors don’t typically enter major transactions when someone is going through bankruptcy without the Trustee and the Court’s approval. However, in some cases, the ability to purchase a vehicle or refinance when you have already made the purchase can be complicated.

Even further, making a purchase or refinancing may have an unintended effect on your bankruptcy case. Be sure to weigh out the options before deciding to move forward with any financial decisions during a bankruptcy claim.

Reason to Reconsider Refinancing

While the creditors may not get in the way of a big purchase, you may want to consider if it’s the right time. The court may be interested in how you have sudden access to cash and may scrutinize your bankruptcy in light of the lower monthly expenses.

Necessary Purchases

On the other hand, necessary purchases will receive less scrutiny. Courts understand a car is required to get to work. Instead, they will look more into what you are buying. For instance, if you are leasing a dream car such as a brand-new BMW, it will not look good while filing for bankruptcy. Purchasing a car that is low in cost and good on gas, however, is an understandable expense.

Try to Wait

The process of a Chapter 7 bankruptcy can be completed in under 90 days, making it easy to wait out the process. Having a long-term rental or borrowing a car can make a lot more sense in the duration of the case. However, Chapter 13 bankruptcy cases have approved plan payments in place. If you are under Chapter 13, adding a cost such as transportation or refinancing could mean having your cash flow reexamined, costing time and putting your claim at risk for increased plan payments.

Disclose All Information

It pays to be honest. Informing the trustee of any major financial changes will not only make them trust you more and be less suspicious, it can avoid big problems. Having an attorney on your side can also help. Speaking with your lawyer about these changes as they occur will help them best advise you during the process. At Malamut & Associates, our team of lawyers advise our clients during all crises as a law firm with a key focus on crisis management.