Here at Auto Credit Express, we specialize in helping people with bad credit find auto financing. For this reason, we are constantly getting asked about auto loans from people in all types of challenging credit situations. Getting approved for an auto loan in an open bankruptcy is one of those topics. Take this comment we recently received:

"I am curious enough about getting an auto loan while under bankruptcy please give me a call thank you."

It's often said that it is impossible to get approved for an auto loan during a bankruptcy. That's simply not true. It's entirely possible to get approved for auto financing during bankruptcy. You just need to find the people who can help.
auto loan during a bankruptcy

Open Bankruptcy Car Loans

Your bankruptcy is considered "open" after you have filed your papers with the court. It remains open until you receive your discharge papers. In the U.S., an individual can file for Chapter 7 or Chapter 13 bankruptcy. It's possible to get approved while in either one of those, but note that it will be much more difficult in an open Chapter 7.

  • Chapter 7 Bankruptcy Auto Loans
    A Ch. 7 bankruptcy is only open for approximately three to four months. Technically, it is possible to apply and get approved for a car loan after the meeting of creditors (341 meeting) has taken place. However, your approval chances improve significantly if you wait until you are discharged. The reason for this is that if you are approved for a car loan before you are discharged, you could include the loan in your bankruptcy. This would cause any lender who approved you to lose a lot of money. Therefore, it makes much more sense to wait the few months before applying.
  • Chapter 13 Bankruptcy Car Loans
    You set up either a three- or a five-year repayment plan in a Ch. 13 bankruptcy. While it is much longer than a Ch. 7, it's also much more possible to get approved with the bankruptcy still open. The Ch. 13 auto loan process involves more steps, but we break them down for you here. Basically, you need to get the court's permission before you're allowed to take on more debt.

Whether you are seeking an open bankruptcy auto loan or a post-bankruptcy one, it is possible to get approved if you are working with the right people. It will also help if you approach the car buying process in a different way.

Tips on Getting an Auto Loan During a Bankruptcy

Getting approved for auto financing during or after bankruptcy is a little trickier than the average car loan. However, these tips can help improve your approval chances:

  • Choose a Modest Vehicle
    The priority at the moment should be getting reliable transportation you can comfortably afford. So, forget about your dream car for the time being and try for something modest as you work to rebuild your credit. Go for something affordable with a payment that amounts to less than 15% of your monthly pay.
  • Keep the Loan Term Short
    A bankruptcy causes your credit score to take a hit. Bad credit financing also means facing a potentially high interest rate. However, you can lessen the impact of your APR by keeping your loan term as short as possible.
  • Have a Down Payment
    A down payment can help your chances of getting approved. This is because it lowers your vehicle's loan to value (LTV) ratio. A down payment will also help you save money on your car loan. It reduces the amount you need to finance, which lowers your monthly payments and allows you to save on interest charges.
  • Work with the Right Dealership
    Perhaps the biggest obstacle standing in your way of getting approved is finding the people that can help. With a bankruptcy in the picture, almost all traditional lenders will turn you away. Instead, you need to get financed with a subprime lender, and they only work with certain dealerships. And, lucky for you, the Auto Credit Express dealership network is full of those that work with subprime lenders.

The Bottom Line

Auto Credit Express can help you find financing if you are going through or recently completed a bankruptcy. The dealerships in our network are trained to help people in all kinds of credit situations.

Whatever your situation may be, we want to help you find the right car dealership. Get started today by completing our free and easy car loan request online.