Chapter 13 Loan Process

More and more people with open Chapter 13 Bankruptcies are asking for our help getting an auto loan. I-5 Auto Credit has developed a way to streamline the process for our customers. At the bottom of this page, there will be two links to documents that you can choose from to send your trustee and attorney, but first let’s go over the Chapter 13 Auto Loan process with you.

A Chapter 13 Bankruptcy is a repayment plan where the person(s) filing bankruptcy enter a 36 to 60-month repayment term. The debtor(s) may pay 100% of the debt, but usually it is much less. The debt that the debtor does not pay back is discharged upon completion of the plan. Usually people who file a Chapter 13 instead of Chapter 7 earn too much money to file a Chapter 7, are trying to keep a home, or have already filed a Chapter 7 and are not eligible to file again at the time of the Chapter 13 filing.

While the debtor is in the repayment plan, they are not allowed to get any new debt without the Trustee or Bankruptcy Judge’s permission. Permission to obtain debt outside of the Chapter 13 Bankruptcy plan is called different things depending on the court and state. Sometimes the debtor will need to file for a Motion to Incur Debt and appear before the judge. Sometimes a debtors attorney will be able to simply email the trustee a form requesting permission for an auto loan and the trustee will quickly send the approval back.

 

The Chicken and the Egg

This is where the process gets somewhat illogical. The trustee usually wants the formal request for an auto loan to have a specific vehicle, interest rate, price, and payment. However, the trustee will sometimes (not always) take 3 or 4-weeks to get around to approving a request for debt. Loan approvals thirty days from submission, which means that sometimes the approval terms are invalid by the time the trustee approves a loan request. Also, dealerships do not like to tie their inventory dollars up for 30 days hoping that a trustee *might* approve a request for an auto loan (sometimes the request is denied).

If the customer gets approved by the lender and picks out a car before they have the trustee loan approval in their hands, there is a decent chance that the loan will expire and/or the vehicle will be gone by the time that the trustee gets around to approving the request. However, the trustee does not want to grant an approval without the terms and vehicle on the request.

Should the loan and vehicle come first, or the trustee approval?

We need both. However, in our experience, it is easier to get a second or third approval from the trustee once a debtor already has their first approval. It is not easy for an auto dealer to hold a vehicle for a week or a month waiting for a potential trustee approval.

 

The Solution

At the bottom of this page are links to two forms, one of which you will need to fill out and email to both your Washington Bankruptcy Trustee and Attorney.

One of the forms has a structure already filled out saying that you are buying a vehicle for $15,000 or less, with a monthly payment of $400 or less, and an interest rate of 19.99% OR LESS. Don’t get scared about any of those numbers, they are not final. Most trustees that we have worked with lately are approving requests at these limits without requiring a hearing to review your finances and bankruptcy plan.

The other form is blank. You can use the blank form if you are trying to buy a more expensive vehicle, like a newer truck or SUV. If you have applied with I-5 Auto Credit for the loan, we can help you with the numbers to fill in on the blank form.

 

 

If you want to try to buy a specific vehicle that you found at some random dealer or private party, feel free to use the blank version of the form and see if the trustee will say yes. You still need to find your own financing by getting a lender to approve the loan on that vehicle. I-5 Auto Credit CANNOT help you buy that car you found on craigslist, or a vehicle you found at a car lot that doesn’t do Chapter 13 Auto Loans.

If after you get the trustee to approve your request on that vehicle, but you cannot find a loan to buy it, please consider buying something else through our programs. We have roughly 1000+ available vehicles through our different dealers. We should be able to find something you like.

Disclaimer: All pricing and details are believed to be accurate, but we do not warrant or guarantee such accuracy. The prices shown above, may vary from region to region, as will incentives, and are subject to change. Vehicle information is based off standard equipment and may vary from vehicle to vehicle. Call or email for complete vehicle specific information. *These estimates reflect new EPA methods beginning with 2008 models. Your actual mileage will vary depending on how you drive and maintain your vehicle. Actual mileage will vary with options, driving conditions, driving habits and vehicle’s condition. Mileage estimates may be derived from previous year model. All vehicles are one of each. All Pre-Owned or Certified vehicles are Used. A dealer documentary service fee of up to $150 may be added to the sale price or capitalized cost. All offers expire on close of business the day subject content is removed from website, and all financing is subject to credit approval. Prices exclude tax, title, and license. All transactions are negotiable including price, trade allowance, interest rate (of which the dealer may retain a portion), term, and documentary service fee. Any agreement is subject to execution of contract documents. Every reasonable effort is made to ensure the accuracy of this data. Please verify any information in question with a dealership sales representative. *Mileage shown for each vehicle is an EPA estimate.

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