Motion to Incur Debt in a Chapter 13

A Chapter 13 debt consolidation plan, which is commonly called a wage earners plan, is a type of bankruptcy where the debtor is paying all or part of the unsecured debt over a period of three to five years. Of course, any unsecured debt that is not paid back will be discharged at the end of the plan. A debtor’s secured debt and any priority may also be paid back through the debt consolidation plan.

During a Chapter 13 debt consolidation a debtor is not allowed to incur any new debt without the consent of the bankruptcy trustee and the bankruptcy court; however, there will come a time in most Chapter 13 cases where a debtor will need to incur some type of secured debt. In a Chapter 13 debt consolidation case our Montgomery bankruptcy attorneys may file a Motion to Incur Debt as part of the plan. This motion is made to the bankruptcy court and served upon the bankruptcy trustee. What has generally occurred is that the debtor has the need to purchase something like a reliable automobile or some other type of necessity. This may include things not only such as a car, but also a washing machine, oven, or furniture. When this occurs we often ask the court to allow the debtor to have approval to spend a lump sum amount that can be used to purchase the necessary item.

If the Court approves the motion, the order may include such wording with an explanation of what debt can be incurred and what the amount of debt cannot exceed without approval from the court. It may also include an amount. for the monthly payment to not exceed because this may affect the payment to the other creditors and the bankruptcy plan. The trustee has a vital interest in knowing and being heard on the amount of debt that is being sought by the debtor. It is of vital importance when filing a Motion to Incur Debt that you follow the trustee’s rules and guidelines. Failure to do so will almost always automatically prevent the debtor from being able to borrow the money. In most cases our Montgomery bankruptcy attorneys contact the trustee before filing the motion and discuss the matter with the trustee. In doing so our attorneys have a clear understanding of what the trustee will approve and what the trustee will not approve.

If the Court grants the Motion to Incur Debt, then the wording of the order may be slightly misleading to the debtor who has little experience in the bankruptcy system. On many occasions we have had our clients call and be completely confused by the order; however, we always explain to a client that the wording must conform to the bankruptcy regulations and to the trustee’s rules and guidelines. Also, any further debt that a debtor needs to incur that is more than the original amount that was asked for in the motion to incur debt will require the debtor to file another Motion to Incur Debt. In other words, if you need more money than originally sought then you must go through the process all over. In some cases, if you want to make payments to a new lender outside of the plan and you're not attempting to discharge the debt at the end of the plan, then you do not have to ask the Court or the trustee for permission; however, if you start missing your Chapter 13 payments because of the new additional debt, then the Chapter 13 trustee may object and ask that your case be dismissed.

Our Montgomery bankruptcy attorneys are here to help you. All consolations are always free, and we can usually see you within 24 hours. We have four convenient offices located in Montgomery, Selma, Greenville, and Troy. You may call us at 334-LAWYERS (529-9377) to set an appointment. You may also reach by using the “text us” link or Contact Form on our website. Remember that doing nothing changes nothing so call us today!

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