Chapter 13 and Title Loans: Understanding How These Situations Works

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Written By Berry Mathew

You might know about Chapter 11 bankruptcy, but there’s also Chapter 13. That works a little differently. We’ll discuss both in this article.

You may also know about title loans. If so, you may wonder whether you can get one if you file Chapter 13. We’ll also run through that, so you understand how it works. You can usually get a personal loan after bankruptcy, but certain conditions will apply.

What is Chapter 13 Bankruptcy?

First, let’s discuss bankruptcy. The term means liquidating your remaining assets when you can’t pay your debts. You take the money from liquidating any remaining assets, and it goes toward your creditors.

If you do this, you can usually get some relief. The court system dictates what you must pay and what your creditors will accept. Often, you’ll no longer pay back the full amount you owe. You get a fresh start of sorts.

You can file for Chapter 11 bankruptcy or Chapter 13. They’re similar but not quite the same. Usually, if you’re in dire financial straits, you will talk with a bankruptcy attorney or specialist who can advise you. They will tell you whether you should declare bankruptcy, what that process involves, and which kind you should declare.

With Chapter 11, you, the debtor, may incur unsecured debt after declaring. You can do so in the ordinary course of business. You can do so without the court’s approval.

With Chapter 13, you, the debtor, may not incur any new debt unless the court handling your bankruptcy specifically approves it. You might also get a trustee’s permission if the court assigned you one.

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What Does This Mean?

In other words, if you look at Chapter 11 and Chapter 13, Chapter 11 means you have considerably more freedom following your declaration. You can incur unsecured debt without checking with the court or your trustee, provided you take on that debt through a reputable business venture.

If you file Chapter 13, you have less control. You must contact the court or trustee and verify you can take on new debt through a business deal before moving forward.

Some people who file Chapter 13 chafe when they hear these restrictions. You should understand, though, that if you take this legal action, you’re in trouble financially. Having someone monitor your finances probably isn’t such a bad thing.

What About Title Loans?

A title loan means you’re using your car as collateral and getting a secured loan from a lending entity, like a credit union, bank, or some other lender. You can sometimes find online entities that offer these loans that aren’t credit unions or banks.

With title loans, you must own the car and have the title that proves it. Since you’re putting up the car, the lender, assuming they give you the money, will now have a lien on it.

That means they can potentially take your car from you if you can’t pay back the loan within the stipulated time frame. That makes these loans inherently risky. If you feel like you can’t pay back that loan on time, you should probably not get one.

You should also know that you must pay back these loans fairly quickly. They’re short-term loans, usually only giving you the money and stipulating repayment within a few weeks.

You will also usually pay more interest with these loans than with some other kinds. If you have a stellar credit score and a reputable, dependable job, you can generally get an unsecured loan with a lower interest rate.

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Can You Get a Title Loan After Filing Chapter 13?

You may wonder whether you can secure a title loan after you file for Chapter 13 bankruptcy. Sometimes you can. Before you do, though, you must notify the court or a trustee. You can’t legally move forward without doing that.

Essentially, if you file for Chapter 13 bankruptcy and want a title loan, you must go through two approval processes rather than one. First, you must contact the court or the trustee and tell them your intentions. Then, if they say you can proceed, you can contact the lending entity and see whether they’ll approve you.

If the lender turns you down, you can look into other lending entities. You might find one that says yes when other ones say no.

However, if the court or the trustee turns you down, you’re out of luck. Maybe you can raise some money in other ways, but you can’t get a title loan, at least not at that moment. Perhaps in the future, if you establish that you’re doing better financially and showing good fiscal judgment, you might get a title loan.

How Else Can You Raise Money?

If you try getting a title loan after filing for Chapter 13 bankruptcy and find that you can’t do it, you might try raising money in other ways. Finding a better-paying job becomes a viable option. 

You can spruce up your resume and look at Indeed, Monster, and LinkedIn. You might find a position that pays better and for which you have the required skills and background.

You might also ask your boss whether you can get a raise. If you have been at that company for a while and you’ve proven your usefulness, they may say yes.

You might get a second job if you have the time and energy. You might look into further schooling. Some states now offer free community college courses, while others offer discounted ones.

You might also think about changing careers. Perhaps you feel like you’ve reached the top with one profession, but you might try another. If you have additional skills that can make you money through a different niche, you can move in that direction.

After filing for Chapter 13 bankruptcy, getting a title loan can sometimes work, but not always. If you try getting one and the court or lender turns you down, you must consider other options.