Chapter 13 bankruptcy cases are considered “reorganization” bankruptcies. The case will last between 3 and 5 years, and during that time the debtor will repay at least a portion of that debt. Chapter 13s are great for many debtors, but they can be cumbersome because many large life decisions require court approval.

For instance, if you want to obtain a new car loan during Chapter 13, you must first seek court approval. Here is how it works. 

Let’s say that your existing car dies or you just decide that you need something different. Outside of bankruptcy, you would go to a car lot and make a deal. You might obtain financing on your own or through the dealer. In any event, the transaction will take a few hours.

During Chapter 13 bankruptcy, you are not allowed to incur new debt without court approval. In Sacramento, the car buying process isn’t so easy.

You first have to make a deal on a specific car and arrange for financing. You literally do all of the paperwork up to the point where you would sign and drive away with the car.

You then take these final details to your Chapter 13 attorney. The attorney then has to seek court approval. The process is called a “Motion to Incur Debt.” The court rules here in Sacramento typically require at least 14 days notice between when you file your motion and when it is approved by the court. During that 14 days, your car might be sold to someone else! Most car dealers won’t hold the vehicle.

Because you’re in bankruptcy, your credit might not be very good. I’m finding that clients aren’t able to obtain loans on their own with terms that the court will accept. That’s right — the court reviews the car loan details to make sure that it is appropriate for your case.

Judges here in Sacramento are loath to approve car loans with high interest rates. On the one hand, this makes perfect financial sense. High interest rates on car loans are very predatory and take advantage of people with bad credit. However, it can be frustrating to have the court deny your request to purchase a vehicle on credit, especially if your previous car died or is no longer running.

To get around these requirements, some bankruptcy filers find a credit-worthy consignor, or even have a family member take out a loan in their name. These aren’t always good options, but some creativity might be needed to get yourself out of a jam.

I am a Sacramento Bankruptcy Attorney. I help many people with Chapter 13 reorganizations. Please call my office at (916) 333-2222 if you have questions about Chapter 13 in Sacramento. 

Bankruptcy hijacking has been a problem in Southern California bankruptcy courts for some time. The trend is starting to show up in the Sacramento Bankruptcy Court too. Here is what you need to know about this concerning phenomenon.

Bankruptcy hijacking can be defined as a third party fraudulently taking advantage of a debtor’s bankruptcy case without the debtors knowledge. Sound confusing? It is! Here is an example that illustrates what has been happening in bankruptcy courts up and down the state.

One of the main protections of filing for bankruptcy is known as the “automatic stay.” The stay acts to protect a person from nearly all collection activity while the debtor’s bankruptcy is sorted out by the court. The automatic stay is so powerful that it can even stop a bank from foreclosing on a house. It is this protection that unscrupulous individuals are taking advantage of — and make no mistake, it is seriously illegal.

Let’s say that Person A is about to have their house foreclosed upon. They hire an unscrupulous person, Scam Artist, to “stop the foreclosure.” What Scam Artist does is pretty clever: he or she fakes a grant deed from Person A to Debtor and back dates it prior to the bankruptcy. Scam Artist then faxes the fake grant deed and a copy of Debtor’s notice of bankruptcy to the foreclosure servicer. The servicer, now thinking that the house is protected by Debtor’s bankruptcy stay, pulls back and stops the foreclosure sale. Up until this point, Debtor has no idea any of this is happening.

The first Debtor hears about the scheme is when Bank comes into the Bankruptcy Court and files a “Motion for Relief from Automatic Stay.” This motion is a request by the Bank to have the Bankruptcy Court lift the automatic stay so that Bank can proceed with the foreclosure. Debtor, the Bankruptcy Trustee, and the Court are all very confused when this motion shows up for one simple reason: the property listed in the Motion isn’t listed on any of Debtor’s bankruptcy paperwork. This is for good reason: the property doesn’t belong to Debtor!

Debtor now has to respond to the Motion, incurring time and expense. Debtor also has to endeavor to convince everyone in the process that they weren’t perpetrating a fraud on the Court by not “listing” the house referred to in the Motion. This is a huge mess for everyone involved.

Presumably, Person A has bought themselves a few extra months in their house. But they also have put themselves at risk of criminal prosecution. For the Bank’s part, their sloppy reliance on a forged grant deed has unnecessarily complicated Debtor’s bankruptcy case. There is plenty of blame to go around.

To find out more about the bankruptcy process in Sacramento, please call my office at (916) 333-2222. I can guide you through the Chapter 7 and Chapter 13 bankruptcy process.