District rule

Chapter 13 Car Loan Rules: Southern District of Indiana

Written by JaredLast reviewed 2026-08-25

What does Local Rule B-4001-3 require before a Chapter 13 filer in this district can finance a car?

It splits on a dollar figure. Local Rule B-4001-3 of the Southern District of Indiana's Local Rules — effective June 1, 2010, as amended through December 1, 2022 — lets a debtor incur up to $2,500 in non-emergency consumer debt with no trustee approval and no Court order at all. Above that amount, the debtor has to ask the trustee first, and a court-filed Motion to Incur Debt is required only in three specific situations the rule spells out. None of the rule's dollar figures, interest-rate language, or procedure differs by the type of debt — a car loan is treated the same as any other non-emergency consumer debt under this rule.

How much can be financed before any approval is needed at all?

$2,500 or less. The rule's own text: "The Debtor may incur non-emergency consumer debt up to $2,500.00 without the trustee's written approval or Court order." Above that figure, subparagraph (a)(2) is just as direct: "The Debtor shall seek the trustee's approval or a Court order under subparagraphs (b) and (c) of this rule before incurring non-emergency consumer debt of more than $2,500.00." A car loan for $2,500 or less needs no filing and no letter to anyone under this rule; a car loan for $2,501 does.

What has to be in the request once it goes to the trustee?

Six items, unless the trustee has directed use of a specific form. Subparagraph (b) requires the debtor's request — for debt other than debt secured by real estate — to include:

1. a statement in support of the feasibility of the request;
2. a description of the item to be purchased or the collateral affected by the credit to be obtained;
3. a description of the interest held by another entity in collateral affected by the credit;
4. the reasons why the debtor needs the credit;
5. the terms of the proposed financing, including the interest rate; and
6. the protection proposed for the interest held by another entity in the collateral.

If the trustee approves the request at this stage, the rule says the debtor "may incur the debt" — no court filing follows.

When is a court-filed Motion to Incur Debt required instead?

Three triggers, all in subparagraph (c)(1). The debtor "shall file a Motion to Incur Debt if:" the proposed debt is over $2,500 and secured by real estate; the debtor's request under subparagraph (b) "has not been approved by the trustee"; or the debtor "seeks a Court order on a request that has been approved by the trustee." That third trigger matters for a car loan specifically — a debtor (or a lender) who wants a judge's order on file, not just the trustee's sign-off, can ask for one even after the trustee already said yes.

What happens once a motion is filed?

The motion has to include everything subparagraph (b) requires, plus — if the new debt replaces an existing secured obligation — the original principal balance, interest rate, monthly escrow, monthly payment, and maturity date. Then comes the clock: "Unless the motion states or documents the trustee's approval, the Court shall give the trustee 14 days to object to the motion." That's an objection window measured from when the motion is filed, not a promised turnaround time for the whole approval process, and it only applies once a motion is actually in front of the court — it says nothing about how long the trustee-only route under subparagraph (b) takes. Local Rule B-4001-3 states no deadline for that step.

Does the rule set an interest-rate cap or a payment cap?

No — and this is the point where the rule's text and the trustee's actual practice diverge. Subparagraph (b)(5) requires the request to disclose "the terms of the proposed financing, including the interest rate". Disclosure is not a ceiling. Local Rule B-4001-3 never states a maximum interest rate, a maximum monthly payment, or a maximum loan amount for a car purchase.

Those numbers come from the trustee's office, and this district's Indianapolis Division has two standing Chapter 13 trustees who publish two different sets of numbers on their own vehicle-loan forms:

Both offices cap the interest rate at the same 21% figure. The monthly-payment cap is where they diverge — $475 versus $500 — inside the same division of the same district, under the same local rule. Neither form carries a printed revision date; both are the versions currently linked from each trustee's own website, accessed August 2026. Local Rule B-4001-3 itself is district-wide, covering the Evansville, New Albany, and Terre Haute divisions as well as Indianapolis, but this page has not verified whether trustees in those other divisions publish comparable numbers of their own.

Does the rule require the debtor to be current on plan payments, or require an attorney's signature?

Local Rule B-4001-3's text doesn't say, on either point. It lists what a request to the trustee must contain — a feasibility statement, a description of the item or collateral, the reasons for the credit, the financing terms, the protection proposed for another entity's interest — and it says nothing about whether plan payments have to be current first, and nothing about who has to sign the request or the motion. Where this page found other districts' trustees stating a current-on-payments requirement directly in their own guidance, see the pillar's district comparison for that sourced example — it is not something this rule's text states for the Southern District of Indiana, and this page treats that as silence rather than filling the gap from another district's practice.

What if a car loan is taken on without going through this process?

Local Rule B-4001-3 doesn't say — the consequences run through the Bankruptcy Code itself, not the local rule, and they're the same mechanism the motion-to-incur-debt glossary page describes in full. In short: under 11 U.S.C. § 1305(c), a postpetition claim the lender files "shall be disallowed if the holder of such claim knew or should have known that prior approval by the trustee of the debtor's incurring the obligation was practicable and was not obtained." Separately, § 1327(a) makes the confirmed plan's terms binding on the debtor and every creditor, so a payment the plan never accounted for can draw a trustee's objection. Neither consequence is automatic, and Local Rule B-4001-3 adds nothing district-specific to that risk beyond the 14-day objection window described above, which only exists once a motion is filed.

How current is this information?

The Southern District of Indiana's Local Rules carry one date block, and it sits on the rules' cover page: effective June 1, 2010, as amended through December 1, 2022. That is the only date the court publishes for them. The individual rule page for B-4001-3 carries no revision stamp of its own, so the court's site gives no way to tell whether this particular rule was touched in the 2022 amendments or has stood unchanged since 2010 — what this page quotes is the text the court publishes for it today. The two trustee vehicle-loan forms compared above carry no printed date at all; they're the versions each trustee's office currently links from its own website, and either office can revise its numbers without republishing a dated form. A filer or attorney checking this page later should confirm directly with the trustee's office or the court that these figures haven't since changed — that confirmation is exactly the kind of check a local rule and a website snapshot cannot replace.

This is general information about how Local Rule B-4001-3 and two trustees' published forms currently read. It is not legal advice, and it isn't a substitute for asking the debtor's own bankruptcy attorney or the standing trustee's office what a specific case in this district actually requires.