During a chapter 13 repayment plan, you make a monthly payment each month that goes towards the repayment of your debt. While you are completing your plan, you may need to borrow money for unexpected expenses, such as vehicle repairs or home emergencies. Here are a few ways you can get the cash you need when you have an active chapter 13 plan. Before signing on the dotted line, make sure to procure permission from the bankruptcy trustee to take on more debt.
1. Take Out a 401(k) Loan
If you have a 401(k) plan that you use to save for retirement, check the plan terms to see if you can borrow against the money in your account. When you take out a 401(k) loan, you repay the loan over time with payments that are deducted directly from your paycheck.
401(k) loans do not require a credit check; they also have low fees and an affordable interest rate. Since many individuals who have filed for bankruptcy have poor credit, the lack of a credit check makes the 401(k) loan a cheap source of debt.
However, if you do not or are unable to repay the 401(k) loan, it is considered a distribution. This means that you have to pay a 10 percent early withdrawal fee and income taxes on the amount that you still owe. The process of taking out a 401(k) loan is not quick; expect it to be a few weeks before you see the cash from the loan.
2. Take Out a Payday Loan
A payday loan is another loan product that you can obtain without a credit check. When you take out a payday loan, you write the lender a postdated check for the amount of the loan and any fees or interest. The lender does not cash the check until your next payday.
If you are unable to repay the loan on your next payday, you may be able to roll it over into a new payday loan. Rolling over the loan does increase the amount of fees and interest that you pay.
One of the benefits of a payday loan is that you can usually get the cash that you need the same day that you apply for the loan. This is a huge plus if you need the funds for an emergency situation.
3. Take Out a Secured Credit Card
A secured credit card is a product marketed towards individuals with troubled credit. You make a deposit that acts as collateral for the money that your charge, and the card's limit depends on the deposit.
If you are already short on cash, it may not be possible to make the deposit necessary for a secured credit card. A secured credit card also requires a credit check; your credit influences the interest rate that you pay.