As we see it

There are hundreds of web sites on the internet vying for your attention if you are a credit-challenged consumer hoping to finance your next car with a bad credit car loan. The best of these sites, such as autocreditexpress.com, help many of these people raise their credit scores and reestablish their car credit by filling out an online bad credit car loan application and financing a vehicle with a second chance auto loan through one of their affiliate dealers.

Just as importantly, these web sites try to provide their applicants with the information they need in order to make educated decisions about the kind of loan they should choose (such as a tote the note loan versus a bad credit auto loan). The reasoning behind this is simple: a bad decision at this time could result in a loan these people can’t afford which could turn into in a repossession that could lower their FICO scores even further.

Financial Literacy Month

Since April is Financial Literacy Month, the educational coalition Americans Well-informed on Auto Retailing Economics (AWARE) is offering several tips for consumers on “how to be smart shoppers throughout the process — from the research phase beyond the transaction.”

Here they are:

Before financing a car:

* MAKE YOUR PAYMENTS ON TIME. Late or missed payments incur late fees and appear on your credit report, which can impact your ability to get credit in the future.
* CONTACT YOUR CREDITOR IF YOU EXPERIENCE FINANCIAL DIFFICULTY. Repossession can occur if you fail to make timely payments. Vehicle finance companies want to work with you so you can fulfill your financing obligations and reclaim firm financial footing.

The Bottom Line

By following these tips, most of which can also apply if you’re taking out a bad credit auto loan, you can rebuild your credit faster and raise your FICO score more quickly while paying the least amount of interest expense possible on your loan. And while interest rates and loan terms are not as competitive and leasing is not usually an option, the rest of these tips are what we’ve always recommended here at Auto Credit Express.

Finally, you should also know that we have helped thousands of people with bad, blemished, bruised, and tarnished credit buy cars and reestablish their auto credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. So if you are serious about getting your credit back on track, you can begin the process right now by filling out our secure online bad credit car loan application.

For more information, feel free to visit www.autocreditexpress.com to see what we can do for you.

Know what to expect

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. By doing this, applicants can not only reestablish their car credit, they can also raise their credit scores. We also want our customers to be educated about getting a second chance car loan while in bankruptcy.

Getting a car loan after bankruptcy usually means applying for a bad credit car loan through a subprime lender. 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 bankruptcy filings that are available – a Chapter 13 and a Chapter 7.

The Chapter 13 filing establishes a court-appointed trustee. This trustee sets up a payment schedule that must be adhered to during the length 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, 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 owed on the loan. “Cramming” not only reduces the payment, it also reduces the amount the lender receives when the secured asset is paid off.

The Chapter 7 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 filed 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. The rules of a Chapter 7 also allow 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 at the same time, this means that you also must continue making payments on the loan, since a repossession that occurs after the bankruptcy has been discharged will most likely eliminate any chance you have of securing even a bad credit car loan.

Applying for a car loan in bankruptcy

Since a Chapter 13 bankruptcy can last for three to five years or more, while a Chapter 7 usually lasts a little over than four months, lenders approach each type of scenario differently.

In a Chapter 7 bankruptcy, the first step in the process 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 as well as the accuracy of the information contained in the schedule of debts.

The 341 meeting in a Chapter 7 bankruptcy is important, because no lender will consider a loan application if this meeting hasn’t taken place. While most lenders want a Chapter 7 to be discharged (due to the short length of time), there are still a few lenders who will consider someone in a Chapter 7, provided the 341 meeting has taken place.

A Chapter 13 bankruptcy is entirely different. Just as in a Chapter 7, 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 to incur additional debt. This order allows you to take out a new loan while still in bankruptcy. Without this order, you will not be able to apply for any type of loan until the bankruptcy has been discharged.

Since a bankruptcy will appears on your credit report from the time that you file, any lender that reviews your credit file will, before they will even consider a loan, ask for the court order that states you are allowed to assume additional debt. The order will also specify the maximum dollar amount the court will allow you to borrow.

The Bottom Line

At Auto Credit Express we have helped thousands of people with bad, blemished, bruised and tarnished credit (including bankruptcies) buy cars and reestablish their credit at the same time. Our nationwide network of affiliate dealers specializes in bad credit car loans. When you decide to buy a car, our online bad credit loan application can be filled out in the comfort and security of your own home.

For more information, visit www.autocreditexpress.com to see what we can do for you.

What we know

Here at Auto Credit Express, we are more than happy to advise our customers about those things that we are familiar with, and that includes anything to do with car loans in general and bad credit car loans in particular. One thing we will not do, however, is to give anyone legal advice. If you are a customer looking for that kind of advice, we suggest that you consult a lawyer. If you are reading this article and you are contemplating filing for bankruptcy, we also strongly advise you to consult with a lawyer that specializes in bankruptcy law.

What we would like to do at this time is to familiarize you with the different types of bankruptcies as well as some of the terms involved with bankruptcy proceedings. Later on, we will also discuss how, in our experience, a bankruptcy affects your ability to finance a vehicle.

Chapter 7 versus Chapter 13

There are a number of different bankruptcy types in the United States. But for most individuals, the choice is between a Chapter 7 bankruptcy filing and a Chapter 13 bankruptcy filing.

Chapter 7 – This type of bankruptcy is known as a liquidation bankruptcy. During the bankruptcy, all unprotected assets are sold off to satisfy the claims of the creditors. When the debt involves collateral (such as a home or a car), you have three choices:

• Redemption – In a redemption, you pay for the current value of the collateral in a single cash payment. Once this occurs, the collateral is yours free and clear of any secured interest (such as a bank).
• Reaffirmation – In a reaffirmation, you agree (reaffirm) that you will continue the debt. You also agree to continue paying on the debt during and after the bankruptcy until the original terms of the contract have been completed.
• Surrender – When you surrender a debt, you give up all rights to the collateral and it now belongs to the creditor – who is now free sell it in order to recover the balance owing on the debt.

Chapter 13 – This type of bankruptcy is known as a reorganization bankruptcy. A successful Chapter 13 bankruptcy lasts for either 3 or 5 years, depending on how the income of the filer(s) compares to that of the median income of individuals in the state in which they reside and file. The plan must allow for full payment of (1) priority claims (taxes, support) and generally for payment of the value of (2) secured claims (secured by a lien such as an automobile – although this type of claim does not include real estate). It also calls for payment on (3) unsecured claims – in that order. The amount of the monthly payment is based on a form that’s filled out that is an evaluation of living expenses and the disposable income that is left after these expenses. While you’re in a Chapter 13 bankruptcy, you agree to:

• Make the plan payments as set forth by the court
• Not incur significant debt without the approval of the court
• Maintain insurance on any collateral

For both types of bankruptcies, the court appoints a professional called a Trustee. Although the trustee has different duties in both types of bankruptcies, he/she is there to manage your payments and act in the interests of your creditors.

When is a bankruptcy completed?

Bankruptcies are terminated when they are either discharged or dismissed. If a bankruptcy is dismissed, it means that the bankruptcy has been unsuccessful and the filer is still legally responsible for all debts as if the bankruptcy never happened. A dismissal is usually the result of a filer being in a Chapter 13 and not making the monthly payments per the court order. A dismissed Chapter 13 also means that you will have a very difficult time getting approved for a car loan, even from a subprime lender.

When a bankruptcy is discharged, it means that the process has been completed successfully. All debts that can be discharged are no longer legally enforceable against the debtor (some debts such as student loans, child or family support and criminal restitution cannot be discharged).

Reestablishing your credit after a bankruptcy

A bankruptcy will stay on your credit report for 10 years from the discharge date. As a rule, the older the bankruptcy, the less impact it has on your credit rating and FICO score.

The successful completion of a bankruptcy (a discharge, not a dismissal) is also a good time to begin rebuilding your credit. At Auto Credit Express, we are experts at helping you obtain a bad credit car loan that will put you “on the road” to better credit. Simply go to our website, www.autocreditexpress.com, for more information. Once you have made the decision to apply, you can even fill out a loan application in the comfort of your home.