Pennsylvania residents who file Chapter 13 bankruptcies enter into payment plans that pay down their debts over three or five years. Chapter 13 payment plans are structured in a way that allows individuals to enjoy a reasonable standard of living, but they do not leave enough money available to cover emergencies. When a person who is making Chapter 13 payments encounters a financial setback, they must obtain approval from the bankruptcy trustee handling their case before they can take on new debt.
People rely on their cars to get to and from work, attend medical appointments and run important errands, so a request to take out a car loan during a Chapter 13 bankruptcy is likely to be granted if the money will be used to replace a vehicle that was stolen, totaled in an accident or has mechanical problems that cannot be repaired. Bankruptcy trustees will look less favorably on requests made by individuals who wish to replace a working car with a more luxurious vehicle.
When individuals making consumer bankruptcy payments wish to take on new debts, they must submit an updated budget and loan paperwork to the court. Bankruptcy trustees approve these requests when the new monthly payment will leave an individual with enough money to continue making their required Chapter 13 payments. This can make things difficult because lenders that are willing to extend credit to people with open bankruptcies tend to charge higher rates and fees.
People who file Chapter 13 bankruptcies to escape unmanageable financial situations may be able to avoid taking out new debt by planning ahead. If they add collision and theft coverage to their auto policies, they may be able to buy a replacement vehicle with insurance proceeds if their car is stolen or totaled.