When Michigan residents file for bankruptcy, the court will review every aspect of their debts, income and assets. Allowances might be made for a vehicle, even if it was bought a short time before the petition was filed.
Because cash in a bank account could be directed toward the payment of creditors during a bankruptcy, the temptation to spend it on a vehicle might arise. The trustee reviewing a bankruptcy case will only allow an exemption for the vehicle purchase if it can be viewed as a necessity for the filer. A purchase could be deemed to have been made in good faith if the car is modestly priced and used. A brand new vehicle might be viewed as an extravagance perhaps meant to absorb cash.
The timing of the purchase matters as well Buying a vehicle immediately prior to filing could create a problem. A purchase might be defensible, however, if the person absolutely needed a vehicle. The trustee will want to confirm that the bankruptcy filer did not already own a serviceable vehicle.
A person struggling to pay bills might wish to discuss the options for bankruptcy with an attorney. Bankruptcy law might enable someone to stop foreclosure or reset loans to manageable payments. After reviewing the person’s income and debts, an attorney could provide insight about which chapter of bankruptcy might offer relief. However, there are stringent eligibility requirements that must be met. Chapter 13 is designed for people who have a reliable source of income that can be applied towards the court-approved repayment plan.