Can You Buy Or Sell Assets During Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a valuable tool to help debtors get financial relief while also protecting their assets or earning a higher-than-average income. But the repayment plan lasts between three and five years in most cases. This is a long time for some people to put their lives on hold.
It's not uncommon to find yourself needing to buy or sell a large asset during this period. Can you do so? If so, what does it involve? Here are a few key things to know about buying and selling things during an open case.
Buying an Asset
Buying new, large assets should be kept to an absolute minimum during your repayment plan. One reason is that the repayment plan was approved by the trustee based on your income, expenses, and debts. Its goal is to allow you to live your life reasonably while paying back as much as is feasible to debtors. If you have money to buy unnecessary assets, the trustee may divert that money to paying back debt instead.
However, some asset purchases are necessary. The most common large purchase is a working vehicle. In general, you would go shopping for a vehicle you feel is reasonable and affordable, then provide the details to the trustee. The trustee will either approve or disapprove the purchase. They may also use this documentation to provide approval for a maximum payment and price if you need to continue to shop.
Selling an Asset
Your assets are part of the bankruptcy estate until you exit bankruptcy. So, you cannot sell large assets without approval from the trustee. Before you sign any sales contract, submit the contract to the bankruptcy trustee. If they approve the sale of your house or car, for instance, the funds from the sale will likely be sent directly to the trustee for inclusion in the bankruptcy estate. The court will then disperse the amount due to you.
The asset sale may also alter your bankruptcy case. If you filed Chapter 13 in order to keep your home, for example, selling it may make Chapter 7 (liquidation) bankruptcy more appealing. In this case, you can switch your case if you choose. The trustee would have to approve this.
Where to Start
Before you make any decisions about buying or selling anything of substantial value, meet with aChapter 13 bankruptcy law group in your state. They will work with you to decide the right course of action and obtain court approvals if needed. Then, you can move forward knowing you've made the right call.