How to Buy a Car for Cash Before Bankruptcy Is Discharged?

Bankruptcy provides relief from debt for businesses and individuals by giving bankruptcy filers a way to cope with debt while being protected from creditors. After a bankruptcy case has been filed, a court-appointed trustee carefully reviews the income and assets of the filer. During the bankruptcy process, the trustee and court will continue to monitor the filer's spending and income. Prior to the bankruptcy being discharged, it is important to work closely with your trustee and discuss all major purchases to avoid having your bankruptcy case dismissed.

Instructions

1. Discuss your desire to purchase a car with your bankruptcy attorney. The bankruptcy attorney hired to represent you will be able to offer advice on how best to approach the trustee managing your bankruptcy case. A bankruptcy attorney will also be able to advise you on the maximum amount of money you will be able to spend on a vehicle according to federal and state exemption laws. Talking to your attorney will help you to avoid having your request immediately denied by the trustee.

2. Contact the court-appointed bankruptcy trustee and explain your need for a new vehicle. If a previous vehicle has become inoperable do to an accident or age, you will be required to provide the trustee with an accident report or vehicle repair estimates. The trustee will also need to know how you intend to pay for the vehicle. When paying cash for a vehicle, the trustee will need to be sure that the money being spent on a vehicle is not money that should be going to creditors. Provide the trustee with documentation that shows trade in value and insurance accident settlement payment amounts. If a vehicle is being purchased with cash obtained from a relative as a gift, be prepared to explain why you must use the money to purchase a vehicle (transportation for work, for medical reasons, etc.) instead of using the money to repay creditors.

3. Purchase a vehicle after receiving permission from the trustee. The court-appointed trustee will provide permission in writing allowing you to purchase a car using cash not to exceed a predetermined dollar amount. After the vehicle is purchased, provide the trustee with copies of sales receipts that show the amount of money spent and to prove the car was purchased for cash and not financed. Financing a vehicle during bankruptcy without prior court approval can lead to the dismissal of your bankruptcy case.

References

• Bankruptcy Exemptions
• What is Bankruptcy
• Federal Bankruptcy Rules