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JoeLawyer, Attorney
Category: Bankruptcy Law
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Experience:  Attorney in the practice of Bankruptcy Law since 1996
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We need to find financing for $14,500 to pay a tractor note

Customer Question

We need to find financing for $14,500 to pay a tractor note off so they do not reposess it. We have an active Chapter 13 bankruptcy but this was not included in it. The bank does not want to refinance. Any suggestions as to some financing company that may be willing to accommidate us?
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  JoeLawyer replied 4 years ago.

I am not aware of a specific company that would do financing, though you can certainly try calling every finance company in town to see if someone will.

A more likely solution would be to add the tractor to the Chapter 13 Plan. This usually stops the bank from repossessing the collateral so long as the debtor can pay the collateral off plus interest (usually around 4.25%) over the remaining term of the Plan.

So, for example, if you are 20 months into a 60-month Chapter 13 Plan, then to pay $14,500 over the remaining 40 months at 4.25% interest would increase the Plan payment amount by around $409 per month. You can go HERE to plug in the principal balance and interest over however long you have left in your Plan, then add 5% or 7% on, to get a rough idea of how much the Plan would have to go up to cover it. I say to add on another 5% or 7% since you have to pay Trustee fees on anything paid through the Plan, and they are usually around that amount (your attorney will know). So, $14,500 over 40 months at 4.25% interest results in a payment of $389.42 per month, and adding on 5% of $389.42 to the payment pushes it up to about $409 per month.

If the Plan has not been confirmed yet, you can often make changes by simply filing an Amended Chapter 13 Plan. If the Plan has been confirmed, then you typically have to file a Motion to Modify the Plan to get court permission to make changes. Either way, one of these approaches normally work to make changes to the Plan.

However, there are a few things that can cause a Plan amendment not to work. For example, if the creditor has already asked the court for permission to repossess (called a Motion for Relief from Stay) and that permission has been granted (Order Granting Motion for Relief from Stay), you may have a tough time going in after-the-fact and trying to force the creditor to get paid through the Plan (though I have sometimes been able to get courts to do this even after the court granted relief to the creditor).

Another glitch could be if the collateral was purchased AFTER the Chapter 13 was filed, in which case you normally can't force a post-bankruptcy creditor into the Chapter 13 Plan (though maybe in your district you can, you would have to ask your attorney).

Another hurdle is whether you can convince the court that the collateral is reasonable and necessary. If the court thinks the collateral is not reasonable and necessary for your financial survival, the court may not let you put it in the Plan. For example, trying to put recreational boats and campers in a Plan usually doesn't work unless you also agree to pay unsecured creditors all of what you owe them. A tractor could go either way: if you own a farm or have a lot of land that needs taken care of, it might be necessary. But, if you use it to pull a float in the parade once a year, maybe not. You also have to show you can afford the increase in the Plan payment.

Another issue could be if you have some prior agreement with the creditor to pay the collateral outside of the Plan. If you and the bank made some agreement in your Chapter 13 that they would be paid directly, then the court may not let you go back in and modify that agreement now (though sometimes the court will even if you did have an agreement).

I suggest you talk to your lawyer about Plan modification and see if it will work for you if you are unable to find a company willing to refinance.

I apologize this answer does not specifically answer your question about who would refinance for you, but that is not something I can answer since banks base their decisions on a whole host of information I don't have so it is not something that anyone can answer with much conviction. I suppose if you own a farming operation you might be able to go to the SBA or the FSA to get a loan, but again I'm sure that would depend on criteria I am not privy to. And, if the bank that currently has the loan isn't willing to refi, then odds are not good that some other bank will want to come in and pick up the same risk without also massively increasing your interest rate, which I why I suggest you look into Plan modification as an alternative.

Good luck,

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