Thursday, November 10, 2016

What Happens If I Just Bought A New Car And Then Filed Bankruptcy?

Have you ever been in the checkout aisle at the grocery store and added several magazines, packages of candy or gum, or pocket sized hand sanitizer to your shopping cart? Or have you ever been walking through the mall and walked in to a store one minute and then walked out an hour or so later with one too many shopping bags full of merchandise? These types of impulse buys can wind up costing you more money than you have, and leave you feeling deflated soon after you get home. But these types of purchases are minor compared to things that you could buy instead. Things like houses, cars, and boats are larger ticket items that can also be bought on impulse, and leave the purchaser strapped too tightly financially.

If you have made a purchase that you can’t really afford, and are thinking that bankruptcy is the answer, there are some things you need to know about how a newly acquired big ticket item will be viewed in your case. Take the example of a car, bought just before you filed a bankruptcy case. In that instance you might expect:

         The lender to seek full repayment of the debt if you filed a Chapter 13. You can normally pay less than what is owed on a car when you propose a Chapter 13 Plan of repayment, but if you have purchased a car too close in time to filing your case, you will be required to pay the full amount back to the lender, or return the car.
         The lender to push you to reaffirm the debt right away if you filed a Chapter 7. The way to hang on to your property in a Chapter 7 is to reaffirm the debt, and this has the same meaning as if you were signing a brand new contract for the debt. In some cases you might be able to persuade the auto lender to give you different terms in the reaffirmation than what your contract provides for, such as a slightly lower interest rate. But if you just made the purchase, it is unlikely you will receive any breaks.
         You may have to face questions about your intent regarding the debt if you made the purchase just before your case was filed. One of the things that is routinely asked at your first meeting of creditors (the 341 meeting) is whether you incurred any of the debt you are attempting to discharge with the intent of never making repayment. When loans are taken out right before a case is filed, it can appear as if you never intended to pay back the loan. If the lender can find facts that support this claim, you might not be able to discharge the debt at all.
These are extreme examples, and do not come up frequently. But, there are times when the need to file bankruptcy arises very quickly after having taken out a loan. If you lose your job, or are hurt, you might not be able to pay tomorrow what you thought you could afford today. If you have questions about what happens when your debts are incurred close to the date your case is filed, call us for answers.

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