What is a Request to Incur Debt?
If you are planning to file for Chapter 13 bankruptcy, or if you have already filed and are in the midst of a Chapter 13 repayment plan, it is essential to understand your rights and obligations when it comes to incurring additional debt. In short, once a bankruptcy court approves a Chapter 13 repayment plan and a debtor begins making regular payments to the trustee — for a period of three to five years in Chapter 13 cases — the debtor may not be able to simply take on new debt if or when they decide they want to do so. Given that Chapter 13 cases are lengthy and take years to complete, it can come as a surprise to debtors that they may not be able to simply incur new debt during the terms of the repayment plan. Instead, they must make a request to incur new debt, sometimes called a motion to incur debt. Our West Palm Beach bankruptcy attorneys can explain.
Various Reasons Debtors Need to Incur New Debt
For Chapter 13 debtors, there are various issues that can arise that may necessitate incurring new debt. For example, you may need to do repairs on your home that simply cannot wait until you have finished the terms of your bankruptcy plan. You may need to finance a new vehicle after yours gives out. Or you may need a medical procedure that comes with significant out-of-pocket costs.
No matter what the reason is, there are a lot of things that can happen in a period of three to five years that can require a person to take on new debt. Yet under US bankruptcy law, a Chapter 13 debtor cannot simply decide for themselves to take on new debt. Instead, the debtor usually must discuss any plans for incurring new debt with the bankruptcy trustee, and it may be necessary to receive approval to incur new debt from the bankruptcy court.
Making a Request to Incur Additional Debt
Generally speaking, a Chapter 13 debtor will need to make a request to incur additional debt. If you are in the midst of a Chapter 13 plan and need to make a major purchase on credit, such as a new vehicle or a house repair, you will need to obtain approval from the trustee and the bankruptcy court ahead of time. The reasoning is that, if you incur new debt without accounting for it properly, you may not be able to pay and complete the terms of your Chapter 13 plan.
When Chapter 13 debtors need to incur additional debt, it can be possible to modify the terms of the Chapter 13 plan in order to include this post-petition debt in the plan — but only with court approval. If you have already incurred additional debt and have not made a request to do so, it is critical to discuss your options with a lawyer immediately. Depending on the nature of the debt, you may be able to still receive approval if you incurred the debt on an emergency basis. Or, depending on the circumstances, if you cannot afford the additional debt within the context of your repayment plan, you may be able to convert to a Chapter 7 bankruptcy.
Contact Our West Palm Beach Bankruptcy Lawyers Today
If you are planning to file for a type of reorganization bankruptcy in South Florida, it is critical to seek advice from a lawyer from the start. It is also extremely important to understand your obligations during the repayment period, including steps you can and cannot take while you are going through bankruptcy, including incurring additional debt. Whether you want to find out more about filing for Chapter 13 bankruptcy or you have already filed and need assistance with a request to incur debt, an experienced West Palm Beach bankruptcy attorney at Kelley, Fulton, Kaplan & Eller can assist you. Do not hesitate to contact us to ask questions or to seek assistance with your Chapter 13 bankruptcy case.
Sources:
law.cornell.edu/uscode/text/11
uscourts.gov/court-programs/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics
