Consumer Car Buying Advice Blog

What you need to do if you need reliable transportation before a bankruptcy has been completed.

Bankruptcy

Getting a car loan after bankruptcy usually means applying for a bad credit car loan through a subprime lender. We know this because at Auto Credit Express our business is to match up our credit challenged customers, who have filled out our bad credit auto loan application, with dealers in our nationwide network that can help them get this kind of a loan. When approved, these applicants can not only reestablish their car credit, they can also raise their credit scores.

We also want to make sure that they make the right choices during the bad credit auto loan process because if a mistake is made at this time, it could result in repossession later on. Once this happens, the only remaining choice for most buyers is a Tote the Note, We Finance Everyone car dealer. A repossession also means that rebuilding your auto credit has to be put on hold for at least a year, since most lenders that offer auto loans for bad credit will only consider approving applicants with a repossession that’s more than a year old.

But what happens if you need reliable transportation before your bankruptcy has been completed? In order to answer that question, we first need to look at the kind of bankruptcy you’re in.

Types of personal bankruptcies

For most individuals, there are basically two types of personal bankruptcy – a Chapter 13 and a Chapter 7.

A Chapter 13 bankruptcy filing establishes a court-appointed trustee. The trustee then sets up a payment schedule that must be adhered to during the term of the bankruptcy – normally three to five years. The dollar amount of the monthly payment and the length of time payments are to be made are determined by a number of things including the amount of property involved as well as the individual’s income and expenses. As part of the Chapter 13 process, you may have a choice as to whether or not you want to “cram” a loan. This involves the court forcing the lender to reduce the amount you owe them. “Cramming” not only reduces the payment, it also reduces the amount the lender receives when a secured asset is paid off.

A Chapter 7 bankruptcy filing liquidates a debtor’s assets and distributes the proceeds to the unsecured creditors. Secured assets can be repossessed and returned to the secured creditor. Unlike a Chapter 13, a Chapter 7 can only be done once every 8 years. While most debts under a Chapter 7 can be discharged, certain obligations, such as spousal support, taxes and student loans, are exempt and cannot be discharged. This type of bankruptcy also allows the filer to “reaffirm” a debt. In other words, you can inform the court that you don’t wish to include a portion of your debt, such as a car, in the bankruptcy. By doing this, you retain the property, but you also must continue making payments on the loan.

Your ability to secure car loans during bankruptcy

Since a Chapter 13 bankruptcy can last for years, while a Chapter 7 usually lasts for a little more than four months, bad credit car lenders approach both types differently.

Chapter 7

In a Chapter 7 bankruptcy, the first step to filing is the means test. It’s this step that determines whether or not you qualify for this type of bankruptcy. If the means test is passed, the next step is what is known as the 341 meeting. This is where the court appointed trustee affirms the value of your assets and the accuracy of the information contained in the schedule of debts.

The 341 meeting in a Chapter 7 bankruptcy is important, because lenders that work with these types of car loans will not consider your application until this meeting has been held. While many lenders want a Chapter 7 to be discharged (due to the short length of time), there are also some who will consider an applicant in a Chapter 7, provided the 341 meeting has taken place.

Chapter 13

A Chapter 13 bankruptcy is entirely different. Just as in a Chapter 7 filing, the court appoints a trustee. Because of the time involved, the duties of a trustee in a Chapter 13 bankruptcy are expanded. In order to apply for a car loan during a Chapter 13, you need to petition the trustee for an order from the court to incur additional debt. This order allows you to take out a new loan while you’re still involved in the bankruptcy. Without this order, you are not permitted to apply for any loans during the bankruptcy.

Since a bankruptcy appears on your credit report, all banks that receive your loan application and review your credit file will, before they even consider a loan, ask you for the court order that states you are allowed to take on the additional debt. The order not only gives you permission, it also will specify the maximum amount the court will allow you to borrow.

The Bottom Line

At Auto Credit Express we specialize in placing customers with bad credit with dealers that can help them. These affiliate dealers are knowledgeable and will treat you with the same high respect that they treat every customer that walks through their doors. If you have any questions that our web site can’t answer, feel free to contact us at the toll free number listed there.

If you are serious about getting your credit back on track, why not begin a new chapter in your life by filling out our bad credit car loan application now.

Tags: auto credit, Bad Credit, bankruptcy, car credit, chapter 13, chapter 13 bankruptcy, chapter 7, chapter 7 bankruptcy, credit, credit score, credit scores, repossession, tote the note

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