Buying a car while in a Chapter 13 bankruptcy may not seem like something you can do, but there are instances when something happens and you need a vehicle right away. A Chapter 13 takes years to complete, so there's a process in place to help you buy a car during an open Chapter 13 bankruptcy. We walk you through the steps you need to follow.

Chapter 13 Bankruptcy and Auto Loans

Buying a Car While in a Chapter 13 BankruptcyA Chapter 13 bankruptcy is a process that lasts either three or five years. This type of bankruptcy is called a reorganization bankruptcy, in which you get time to repay your creditors. Your court-appointed bankruptcy trustee creates a repayment plan that you have to follow in order for your Chapter 13 to be discharged.

Because this repayment plan controls your spending, you need to get permission to take on new debt. The court knows that a lot can happen to a car over time, so if your trustee agrees that you need a vehicle and can afford it, the trustee can file a motion to incur debt. If approved, you're given an order to incur debt by the bankruptcy court, which allows you to take out credit.

However, your trustee needs some paperwork from you before they can file the motion to incur debt.

Getting an Auto Loan in an Open Chapter 13

In order to get an auto loan during an open Chapter 13 bankruptcy, you first need to find a dealership with lenders that offer bankruptcy car loans. These are typically dealers that have special finance departments that are signed up with subprime lenders. Once you've found one of these dealerships, you sit down with the special finance manager to fill out a sample buyer's order.

A sample buyer's order is a form that lists all the details of your potential auto loan for the court. Those details include the:

  • Year, make, and model of the vehicle you're planning to finance.
  • Total amount of the loan.
  • Maximum monthly payment.
  • Maximum possible interest rate.
  • Maximum loan term.

It's important for the dealer to mark the phrase "or similar" as part of the car’s details on the sample buyer's order. If they don't, and the vehicle you want has been sold by the time you get your order to incur debt, you have to start the process over again. With the "or similar" listed, you can choose a comparable car and complete the loan process without having to start over.

After completing this paperwork with the dealership, your trustee files it with the court, then you await a decision.

Finding a Bankruptcy Car Dealership

Not all dealerships work with the kind of lenders that can finance a vehicle during bankruptcy. The dealers that do don't always stand out from the crowd. Auto Credit Express knows where to find these special finance dealerships that have the lenders that can help you finance a car while in a Chapter 13 bankruptcy.

The process is easy to start right from home. Simply fill out our fast, free, and no-obligation auto loan request form, and we'll get to work matching you to a bankruptcy car dealer in your area.