Obtained financing during Chapter 13 without approval

[tennessee]

I put this on the end of a different post that was unrelated to this topic. Hope it's okay to post it separately...

Wow...I am so ignorant to bankruptcy law. I've been doing some research this morning and I see now that I am not allowed to finance anything while in a 13. I had no idea. At the end of last year our heating/ac unit went out and my husband had heard through a friend that we could get financing for an install of a new unit through the electric company. He went mad trying to get it approved and even though we were in a 13 they approved it. The unit has been installed. I seriously had no idea that we couldn't do this. It has been financed in both mine and my husband's names at 47.00 a month for 10 years. The amount financed was around $5000. As mentioned in another thread, my husband and I are getting divorced and he may be taking over the house and of course the unit as well...although I'm not sure if he will keep up with payments. We've had the unit for about 7 months. Would this effect my ability to convert to a 7? What would happen to the unit? Have I broken any laws by not getting approval?

[oldhack]

Simply, if the trustee learns of the credit obtained and objects to it, he can (probably successfully) seek to have your Chapter 13 case dismissed, which would put you back where you were prior to your filing.
Thus, you face a dilemma: telling the trustee and perhaps face dismissal, or not tell the trustee and perhaps face dismissal. Personally, I think I'd go the upfront route, and submit a plea of ignorance for mercy.

[tennessee]

Hmmm...that throws a big ol wrench into my plans. Are there cases where the trustee doesn't dismiss the case???? I seriously had no idea that we couldn't do this but I realize that ignorance is no excuse.

[justbroke]

Hmmm...that throws a big ol wrench into my plans. Are there cases where the trustee doesn't dismiss the case???? I seriously had no idea that we couldn't do this but I realize that ignorance is no excuse.

Generally the Trustee is trying to make sure that you stay in Plan. That's their job. Acquiring more debt is one thing that may make the plan falter.

For things necessary for living (roof, plumbing, a/c repairs) are generally approved. You may have to go to the Trustee and eat crow.

Generally, they review what you need and analyze that against your budget and plan payments and make a decision (mostly on necessity and then on ability to pay).

[Flamingo]

Hmmm...that throws a big ol wrench into my plans. Are there cases where the trustee doesn't dismiss the case???? I seriously had no idea that we couldn't do this but I realize that ignorance is no excuse.

What you do is you call your attorney and explain the situation. Many people do not realize that the trustee is in control of your financies during your Chapter 13; you are not. You have to get permission to do most anything financial during your plan as well as report any increases or decrease in income. Witih a divorce possibly pending, you will need good legal advice. Best of luck to you.

[tennessee]

What you do is you call your attorney and explain the situation. Many people do not realize that the trustee is in control of your financies during your Chapter 13; you are not. You have to get permission to do most anything financial during your plan as well as report any increases or decrease in income. Witih a divorce possibly pending, you will need good legal advice. Best of luck to you.

Thanks Flamingo! Getting good legal advice has been my biggest hurdle. My main candidate for my divorce attorney knows nothing about bankruptcy and has even insisted that "he doesn't allow women to give the house away..." If I want to give the house to my soon to be ex, he will not represent me. He says doing this always comes back to him within a year because they regret doing a cut and run. I'm moving in 7 days though and giving up residency of the house...so it's scaring me to not have my ducks in a row before I leave here.

[tennessee]

Thanks again everyone. I'm calling our bankruptcy attorney tomorrow and asking them about the 5K financing we received...Also going to schedule an appointment before I leave town which will be in just a few days This unit was a necessary purchase as we didn't have heating or air conditioning at all...Just not sure what the trustee would do "after the fact" since we didn't get approval beforehand. I can't seem to find anything out online. Surely someone has been in this situation before though.

[Flamingo]

Thanks again everyone. I'm calling our bankruptcy attorney tomorrow and asking them about the 5K financing we received...Also going to schedule an appointment before I leave town which will be in just a few days This unit was a necessary purchase as we didn't have heating or air conditioning at all...Just not sure what the trustee would do "after the fact" since we didn't get approval beforehand. I can't seem to find anything out online. Surely someone has been in this situation before though.

Most people in an active Chapter 13 don't get approved by any financing because the lender knows trustee permission is needed. Those that do obtain it risk dismissal (as a previous poster mentioned). The attorney will advise you what will occur in your situation and is the only one who can get you out of any trouble at this point. Best of luck to you!

[car67]

Call the AC company and pay them in full before and not tell the trustee and this might be the safest route...

[tennessee]

Call the AC company and pay them in full before and not tell the trustee and this might be the safest route...

Ok, getting worried now. The pay off is like 4500 bucks and I don't have that to pay in full...and I'm leaving here in a week. Does anyone know what kind of trouble I could get into? Outside of my Chapter 13 being discharged?

[justbroke]

Ok, getting worried now. The pay off is like 4500 bucks and I don't have that to pay in full...and I'm leaving here in a week. Does anyone know what kind of trouble I could get into? Outside of my Chapter 13 being discharged?

Well, first, you're not in any criminal trouble, so you won't be going to jail or anything like that.

The Trustee's only real weapon in an active Chapter 13 case, is to dismiss. Working with your lawyer, I'm (personally) sure that you can get through this without a dismissal and without the Court's involvement. It's not like you went out and bought a new plasma TV or something frivolous or of a luxurious nature.

They can't fine you. They can arbitrarily increase your plan payments. They can't have you arrested. They can't prosecute you for (criminal) fraud.

[woeisme]

I seriously doubt they will dismiss the 13, typically they only do that for non-payment. if you've proven that you can handle the extra $50 a month in your budget by continuing to make your plan payments, I think you will be ok. Also, you have to have your entire plan re-done due to the divorce, possibly converting to CH 7, so a change in plan payments is going to happen regardless, so I wouldn't really worry, just be sure that you tell your lawyer everything so they can handle it. Best of luck.

[rrockinggramma]

first of all, if you are getting divorced, you may want your chapter 13 to dismiss anyway or if you convert to a chapter 7 all of this "debt" new and old would be included. Converting gives you a new 341 and a new case number. You might want to find another divorce attorney and you need to be upfront about the BK. When I divorced and filed, my attorney told me that many times the trustee wants you to wait to file until AFTER the divorce is final so you know what debts you have (new) and can include everything in the new BK. You need to keep searching for more legal advice here and not sweat the the ac/furnace unit because either way, a new chapter 13 or a new chapter 7 (conversion) it would be included and you would not be reponsible for it in the long run.

[tennessee]

first of all, if you are getting divorced, you may want your chapter 13 to dismiss anyway or if you convert to a chapter 7 all of this "debt" new and old would be included. Converting gives you a new 341 and a new case number. You might want to find another divorce attorney and you need to be upfront about the BK. When I divorced and filed, my attorney told me that many times the trustee wants you to wait to file until AFTER the divorce is final so you know what debts you have (new) and can include everything in the new BK. You need to keep searching for more legal advice here and not sweat the the ac/furnace unit because either way, a new chapter 13 or a new chapter 7 (conversion) it would be included and you would not be reponsible for it in the long run.

You guys are awesome! The main reason I am concerned about the ac loan is because if I convert to Chapter 7 (since the ac loan is also in my name) I will have to disclose it anyway...so the trustee is going to find out about it regardless unless it is paid off before hand which ain't gonna happen. I wasn't sure about what the trustee would do when he found out...but I still don't really know so I'm just going to chill and not worry about it for the moment. At least I know I won't have police at my door! LOL! I scheduled an appointment with the bankruptcy attorney for Friday at 3:00.

Thanks everyone!

[banca rotta]

You guys are awesome! The main reason I am concerned about the ac loan is because if I convert to Chapter 7 (since the ac loan is also in my name) I will have to disclose it anyway...so the trustee is going to find out about it regardless unless it is paid off before hand which ain't gonna happen. I wasn't sure about what the trustee would do when he found out...but I still don't really know so I'm just going to chill and not worry about it for the moment. At least I know I won't have police at my door! LOL! I scheduled an appointment with the bankruptcy attorney for Friday at 3:00.

Thanks everyone!

You probably already know this but I am pretty sure that the AC loan needs to be paid back 100% regardless of the chapter you are filing especially since it's post petition.

If you convert to a 7 you may have to re-affirm the debt or since it was "post petition" it may not even matter that its re-affirmed. Either way it all must be paid back in full. Good luck!