Chapter 13 Auto Financing

Getting an auto loan while in a Chapter 13 Bankruptcy is a very unique process.

If you have been in a Chapter 13 for very long, you know that the Bankruptcy Court and the Trustee basically have total control of your finances. You cannot add any loans to your monthly debt without their knowledge. In Washington, and most other states, in order to get an auto loan with a car insurance quotes for your vehicle while in your Chapter 13 Bankruptcy, you have to obtain a signed Motion to Incur Debt.

Recently, there have been some changes to the process of getting an auto loan while in a Chapter 13 Bankruptcy.

There is a new judge at the Tacoma Bankruptcy Court that used to be a bankruptcy trustee in Oregon. Thankfully, he has brought some of the Oregon processes with him. Instead of the 30 days or so it used to take to get a motion signed by the judge, now it is  only taking 10 days or less.

Old Process: (still in place at Seattle Bankruptcy Court as of June 2011)

1. We make sure your plan is confirmed.
2. We print a make believe purchase order and contract for you to give your attorney as a “similar vehicle”.
3. The attorney sets up the motion with the court, giving 24 days notice (plus 3 days mailing time) to the creditors in the bankruptcy that you want to take on an additional debt.
4. Your attorney goes before the judge and gets a generic motion to incur debt signed. “John Doe can purchase a vehicle financing no more than $15,000 and having a monthly payment under $400.”
5. We get the loan approved. The better lenders do not give an approval until the motion is signed and the plan is confirmed.
6. We help you pick out your car from one of the dealers we work with that meets the lender requirements for the loan, as well as the motion to incur debt. You buy it, and live happily ever after.

New Process: (Tacoma Bankruptcy Court)

1. You contact someone who specializes in Chapter 13 Bankruptcy Loans (like WA Auto Credit)
2. We review your bankruptcy and credit to figure what programs you will qualify for.
3. We filter your probable loan criteria against the available dealers’ inventory to help you find as many vehicle options as possible based on the monthly payment and down payment you feel comfortable with.
4. Once you pick out a car, we prepare all of the paperwork to give your attorney so that you can get a specific motion to incur debt. “John Doe can purchase a 2007 Honda Civic financing $13,072.23 having monthly payments of $357.43.”
5. We will hold your car for up to 10 days allowing you time to get the Motion signed by the judge. Remember, without the motion, you do not have a real approval or a real loan.
6. We then get final approval from the lender and fund your loan. Same as the old process, the better lenders to not give a final approval until after your plan is confirmed and the Motion to Incur Debt has been signed by the judge.