Myths and Truths About Chapter 13 Bankruptcy:  Part I
Many people who are considering filing bankruptcy have misconceptions about bankruptcy.  They may have heard things from friends and family members that may make them apprehensive about filing a Chapter 13 bankruptcy.  Below please find some common myths about Chapter 13 and the truths associated with those myths.
1.  Myth:  When a debtor is in a Chapter 13 bankruptcy, the Trustee will check monthly bank statements and check every expenditure a debtor makes for the life of the Chapter 13 Plan.
Truth:  At the time of the filing of the bankruptcy, the Debtor is required to disclose on Schedule B of the bankruptcy petition how much money they have in the bank.  However, in a Chapter 13, the Trustee will not require a copy of the bank statement.  The Trustee will not check a debtor’s monthly bank statements for the entire 36 to 60 months the debtor is in the plan.  A debtor is required to list their income and expenses when the bankruptcy is filed, and the Trustee assumes that is the average that is being earned and spent on a monthly basis unless the Debtor amends those schedules. 
2.  Myth:  When a debtor is in a Chapter 13 bankruptcy and they need a different vehicle, they will not be able to purchase another vehicle while in the Chapter 13 Plan.
Truth:  Chapter 13 plans range in length from 36 to 60 months.  In that time period, a person’s car may need to be replaced because of a car accident, repairs to the vehicle are more expensive than the value of the vehicle, or a vehicle becomes too old and cannot be repaired.  If that happens and the debtor wants to purchase a vehicle without a loan, they can do so without Trustee permission.  If the debtor wishes to retain a vehicle loan on a different vehicle, they must request permission from the Trustee to do so.  This is called a “Motion to Incur Debt”.  The debtor should contact their attorney and have them file this motion.  The motion must list the year, make, model, and miles of the car they wish to purchase or a similar vehicle in that condition.  It should also describe the down payment, the interest rate, the monthly payment, and the total amount of the loan.  The Trustee has 21 days to object once the motion is filed.  If they do not object, the vehicle may be purchased.  If they object, the motion can be amended and resubmitted.  The Trustee understands a debtor needs a vehicle and will work with debtors and their attorney so they have transportation.
If you have any questions, please contact a St. Louis or St. Charles bankruptcy attorney.