Can I Buy A Car After Filing Chapter 7 Bankruptcy, but Before Discharge?

Question:

My friend filed for chapter 7 bankruptcy. He completed the 341 meeting of creditors about two months ago. He is close to being discharged. Can he buy a car before discharge? Does he need the trustee’s approval? He said that his mother was going to give him the money to do so!

Answer

It is always best practice not to do anything until after bankruptcy discharge. No point in injecting unnecessary uncertainty into something as important as a bankruptcy.

However, a need is a need. If your “friend” needs transportation, he can try and fulfill that need. If his mother is going to buy him a car, that action shouldn’t cause problems for the bankruptcy because the gift occurred after filing. If your friend was going to finance the vehicle, on a practical note, once a lender learns you are in an active bankruptcy, they will probably refuse to lend; on a legal note, you are not supposed to incur new debt during an active bankruptcy. But, if you receive a gift, so long as it is truly a gift, that gift should not cause problems while in an active chapter 7 bankruptcy.

However, your friend will want to discuss the specifics of plan with his/her bankruptcy attorney to make sure everything is done properly so that no hiccups occur in the case.