When you’re going through a bankruptcy in Philadelphia, you may wonder if it’s possible to get another vehicle if you need one. Bankruptcy is no picnic, but it won’t always stop you from getting a car loan in the future.
Is Getting an Auto Loan during Bankruptcy Possible?
As a Philly resident, whether or not you can get an auto loan during an open bankruptcy largely depends on the type of bankruptcy you filed. For instance, if you’re in an open Chapter 7 bankruptcy, you’re less likely to get approved than if you’re in a Chapter 13.
Let’s look at some of the reasons behind this:
- Chapter 7 bankruptcy – Also known as a liquidation bankruptcy, this is a short process that generally lasts around three to six months. Due to its short time frame, lenders typically prefer that you wait until a Chapter 7 is discharged before trying to get financed. During this process, your bankruptcy trustee is responsible for selling any non-exempt property in order to repay your creditors. Non-exempt property in a Chapter 7 could include your vehicle if there’s enough value in it. At the end of a successful Chapter 7, any remaining debt is wiped out in the bankruptcy discharge.
- Chapter 13 bankruptcy – A Chapter 13, known as a reorganization bankruptcy, lasts either three or five years. During this time, your bankruptcy trustee arranges a payment plan that you must follow in order to get a discharge. Your payment plan is designed to repay all or most of the debt you’ve acquired up until the bankruptcy filing date. When you’re in a Chapter 13, you can’t take on new debt, such as a car loan, without the permission of the court. However, because the process takes so long, there are procedures in place to follow if you need bankruptcy auto financing in Philadelphia.
In both types of bankruptcy, you’re sometimes able to keep the property that’s necessary to maintain your day-to-day life, such as your home, essential household furnishings, clothing, and vehicle – as long as these things fall under the exemption amount.
There are both state and federal bankruptcy exemption guidelines, and the amount of property you’re allowed to keep differs between the two. Most states require you to use state exemption guidelines, even though federal bankruptcy exemptions exist.
Some states allow you to choose whether you want to use state or federal exemption guidelines during your bankruptcy. Pennsylvania is one of these states. This means you’re able to use the exemption rules that benefit you most.
However, you cannot cherry-pick exemptions from both (using the federal exemption amount for your car and the state exemption for your home, for example); you must choose to use one set of rules or the other.
Bankruptcy Auto Loans during Chapter 13
If you have to finance a vehicle during an open Chapter 13 bankruptcy, it's possible to get approved for a loan, but you need the court’s permission before you buy something. In order to get a car, your trustee makes sure that you can continue to meet your bankruptcy repayment plan while taking on the additional monthly loan payment.
Before getting a vehicle, you go to a dealership that works with bankruptcy auto financing and get a sample buyer's order. This is a document that outlines the cost of financing, and the type of car (year, make, model) you intend to buy.
It’s important that the dealer lists the highest possible interest rate you might quality for and marks “or similar” with the vehicle's information on the sample buyer's order. You may have to start over from scratch if you don't include these items, as the court can throw out the order if you only qualify for an interest rate that's higher than what's listed or the particular car is gone and "or similar" isn't listed.
Finding Bankruptcy Auto Financing in Philadelphia
No matter if you need an auto loan during your bankruptcy or after your bankruptcy is discharged, you have to find a dealership in Philadelphia that deals with bankruptcy car loans. That’s where we can help.
Here at Auto Credit Express, we work with special finance dealers in Philly and around the rest of the country that have lenders who can work through tough credit situations such as bankruptcy.
Let us help you take the hassle out of finding a bankruptcy auto financing dealership in the City of Brotherly Love. Simply fill out our car loan request form, and we’ll work to match you with a local dealer.