Purpose

• One scenario where a motion to incur debt may be made is where a debtor is selling a house with equity value and an escrow is pending but the debtor can't afford to continue making payments or pay for required maintenance or repair of the house. Borrowing money until the sale is completed would preserve value to the estate and provide housing to the debtor until the sale is complete.
  
  

Grounds

• The major grounds for filing a motion to incur a debt include situations where borrowing is required to preserve equity value in an asset (such as a house, car, boat, etc.) or to continue conducting a business, if the debtor is receiving, or would receive, income from the business.
  
  A court is unlikely to approve a request to incur a debt where the debtor or trustee cannot provide reliable evidence that the debtor can pay back the loan or other obligation at a later date.
  
  

Procedure

• Rule 4001(c) of the Federal Rules of Bankruptcy Procedure describes how the motion should be presented. All the details of the proposed transaction must be provided to the court.