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Restrictions on Obtaining Credit During Bankruptcy

Obtaining credit during bankruptcy can be challenging. If you file for a Chapter 7 bankruptcy, you can apply for credit as soon as the debt is discharged. With Chapter 13 bankruptcy, you will need to receive prior approval from the court or Chapter 13 trustee. Additionally, your plan payment must be current at the time of the request.

If you would like to get new credit during your Chapter 7 or 13 bankruptcy case, you should consult an experienced Cleveland bankruptcy lawyer at Luftman, Heck & Associates. We will explain your situation to you and help you understand obtaining credit during bankruptcy.

Call us today at for a free consultation.

Special Circumstances That May Allow for Credit

Once you have filed for bankruptcy, you are not typically allowed to get approved for credit unless your situation involves a special circumstance. Several special circumstances in which the court may allow you to obtain new credit during bankruptcy include:

  • Medical Expenses – Although you may not consider medical expenses as an incurring debt, they are a form of debt. When you visit a medical professional for services and receive a bill at a later time, the Bankruptcy Code considers this new credit.
  • A New Vehicle – It’s common for individuals to purchase a new vehicle during their Chapter 13 bankruptcies. While getting a loan from a conventional lender can be tough, lenders who cater to individuals making Chapter 13 payments do exist. If you get approved by one of these lenders, understand that you will be paying a high interest rate.
  • Credit Cards – You may be able to get a new credit card during Chapter 13. If you’d like to rebuild your credit, opening a secured credit card can help.

Although you typically need permission to incur additional debts during bankruptcy, “small debts” that are outlined by your Chapter 13 trustee, as well as any new tax liabilities that you incur, do not require the court’s approval.

Process of Obtaining Credit During Bankruptcy

If you’d like credit during Chapter 7 bankruptcy, your 341 meeting with the creditor must be completed. In order to obtain credit during Chapter 13 bankruptcy, you will have to prove to the court that you require credit in order to stay in the plan. For instance, if you need a dependable vehicle so that you can transport yourself to work and earn money to make Chapter 13 payments, the court will likely approve your credit request.

To begin the process of getting approved for credit during Chapter 13 bankruptcy, consult a Cleveland bankruptcy lawyer. They will review your situation and guide you through the proper steps you will need to take in order to obtain credit. You will likely start by acquiring a financial statement that states the terms of the loan. Next, you will fill out Chapter 13 trustee paperwork so that your need for new debt can be evaluated. Then, you will file a motion to ask for the court’s permission and provide your creditors with the motion.

Your motion will either be granted or require a court hearing. If your motion is granted, you will be responsible for providing your new lender with a copy of the court’s order. Since this process may take one month or longer, you should do your best to plan ahead.

How Luftman, Heck & Associates Can Help

Prior to trying to get any type of new credit during bankruptcy, you should speak to a Cleveland bankruptcy lawyer at Luftman, Heck & Associates. Sometimes it makes more sense to wait until your bankruptcy proceeding is over before taking out loans. Once it’s over, you may be better off taking small loans that you can easily repay and use to rebuild your credit.

LHA can evaluate your particular situation and give you advice on whether or not obtaining credit during your Chapter 7 or Chapter 13 bankruptcy is a smart move. Contact us today by calling or emailing advice@clevelandbankruptcyattorney.com.