Q: I will be filing for chapter 7 bankrupcy. Can I purchase a vehicle while I am in the process of filing?
A:
You may purchase a car, with cash, but if you intend to borrow the money. The United States Bankruptcy Code prohibits any attorney to advise you to incur debt before you file a bankruptcy. If you borrow money before you file, that debt will be discharged in the bankruptcy, right away. So, with that knowledge, if you borrowed the money without intending to pay it back, the creditor could ask the Court to deny your bankruptcy based on fraud. If you do borrow, you could and probably should seek to sign a reaffirmation agreement on such a debt. A Reaffirmation Agreement is an agreement, entered into between a creditor and the debtor, before the bankruptcy discharge order. The agreement means that that debt for the purchase of the car would not be discharged and would remain a valid, enforceable debt after your case is over.
Also, if you pay cash for a car, be careful how much you pay. When you file a Chapter 7 Bankruptcy the Court appointed Trustee will examine your assets with the intent to sell the property he can, to raise money to pay creditors. You may exempt, or protect, some of your assets, including a car, but there is a limit on the value of the car you can protect. If you buy a car, and cannot protect its full value, the Trustee could sell it.
If you wait until after you file your bankruptcy, and you wish to borrow funds to buy a car, there is a likelyhood that you would be denied credit or pay a substantially higher interest rate.
This is a complicated area of law and it has substantial risks if you get it wrong. I recommend that you consult with an attorney before filing.
A: Yes. You may get better terms if you buy before you file. Depends on your particular situation.
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