Borrowing Money During Chapter 13 Bankruptcy
In the three to five year period of a debtor's Chapter 13 bankruptcy case, they may feel the need to borrow money. But a Chapter 13 bankruptcy debtor cannot borrow unless they have the bankruptcy trustee's permission. The first question a debtor needs to ask themselves is if it is prudent to borrow money during bankruptcy.
Let's take a closer look:
Refinancing Existing Debt
Sometimes a debtor may want to refinance existing debt to get a lower interest rate, lower monthly payments and/or reduce the balance of the loan. Before taking out a loan, the debtor must closely examine the terms and conditions. If the refinance will only offer the debtor marginal benefit, it may not be worth the trouble. On the other hand, refinancing that offers a big benefit will probably win the approval of the bankruptcy trustee as long as the debtor can afford it.
Buying A New Car
Three to five years is a long enough time to have car troubles arise. Sometimes a debtor may want to take out a loan during Chapter 13 bankruptcy if their car no longer functions. The bankruptcy trustee may grant the request to take out a car loan as long as it has fair terms and the debtor needs the vehicle to get to and from work. However, the bankruptcy debtor should carefully consider other transport options. Can they take public transport? Can they buy a used vehicle with cash?
Industry changes may prompt a bankruptcy debtor to consider returning to school so that they can make more money. Taking out a loan for higher education while in Chapter 13 bankruptcy might be allowed as long as it's probable that such action will lead to higher pay.
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