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If you are in a chapter 13 and need to purchase a new car, a formal application (motion) will be required seeking permission from the Court. Several car dealers may tell you that you need a letter from the Court or trustee. There are no such letters. Many dealers have a finance manager who is designated as a bankruptcy finance specialist. Ask to speak to such a person.
These are the steps you should take to get permission to purchase a vehicle:
a) You need to first find the vehicle you wish to purchase. A new or late model vehicle with a warranty is preferable. The vehicle should be reasonably priced. Although there are no published guidelines, absent some special need, such as carrying passengers for work as a real estate agent or a heavy duty truck for construction work, the trustee will usually not recommend any vehicle costing more than $18,000.00.
b) Ask for a “Dec Sheet.” This is a declaration page, sometimes printed simply on the dealer’s Retail Buyer’s Order Form, setting forth:
-total cash price
-trade-in allowance (if any)
-taxes and fees
-cash paid on delivery
-amount to be financed
-the term of the proposed financing (eg., 60 months)
-interest rate
-and frequency and amount of payments
c) Bring the Dec Sheet to the office so that an appropriate Application to Incur Debt for the Purchase of a Vehicle can be submitted to the Court. Often, the process is fairly automatic because we can get the trustee make a positive recommendation to the Court; however, sometimes this process can take a while, especially if a hearing is required to prove a special need, so don’t get attached to any particular vehicle on the lot, as that vehicle may be sold to another person by the time the order is signed by the Court. Don’t worry, though. The order can be used to purchase an alternate vehicle on substantially the same terms.
Once you have an order from the Court approving your Application to Incur Debt for the Purchase of a Vehicle, you can complete the sale and drive off in your new vehicle.