Changes for Chapter 13 Auto Loans in WA

We have been helping people buy vehicles while in a Chapter 13 Bankruptcy for several years now. We have always needed to get a letter that gave the debtor permission to buy a car and incur a new debt. Usually the letter would say something like “Debtor may purchase a vehicle providing that the amount finance is less than $15,000 and the monthly payment does not exceed $400.” Sounds pretty straight forward, right?

I had an hour long conversation with a Seattle Bankruptcy Attorney today and found that the local Bankruptcy Judges are changing the rules a little bit.

The judges felt that some of the car buyers were making poor buying decisions, so they wanted to review each transaction to make sure that the buy was buying a good vehicle, at a reasonable price and interest rate. Good idea, right?

Here is the twist. In Washington, in order for a debtor to get a letter from the judge that allows the debtor to obtain an auto loan, notice must be given to all the creditors listed in the Chapter 13 Bankruptcy and they have a total of 27 days to respond. So it basically takes a month to get a signed letter allowing the debtor to buy a car. If you go car shopping today, how many of the vehicles that you look at will still be there in a month? Here is a hing: Not many. Do you think a reputable dealer is going to hold onto a car for you for a month without a nonrefundable deposit? NO WAY!

The Solution

Since the judges probably are not going to change, and the banks are not going to change, we need to figure out a way to help our customers that are in a Chapter 13 Bankruptcy buy a car within the rules setup by both the banks and the courts.This is our plan:

1. Create a sample purchase order and contract for the courts just like we have done for the last several years.
2. Debtor’s Attorney submits letter to be signed stating the guidelines of the contract.
3. Judge signs letter (about a month after contract and purchase order were submitted).
4. We then get our customers approved and help them select a vehicle that meets their loan guidelines.
5. With the new vehicle selected, we are often able to get an Ex Parte order signed by the judge that will give permission to buy the new vehicle as long as the guidelines are similar to the contract and purchase order signed originally. Getting the letter signed with an Ex Parte order should take less than a week. Basically, an Ex Parte order allows the judge to sign the letter for you without the month long wait for your other creditors to respond.

Kind of complicated, huh? I wish it were easier, but it seems that all the extra steps were designed to protect the consumer. We have never had any issues with these types of loans in the past, and do not plan to in the future.

If you are in Washington and need someone to help you out with a Chapter 13 Auto Loan, please give us a call or simply apply on WashingtonAutoCredit.com. We are here to help walk you through the whole process of buying a vehicle while in a Chapter 13 Bankruptcy.