Getting a car loan while you're in the middle of a bankruptcy can be dicey, and your chances of getting approved depend on a few different factors. Though some personal bankruptcy filings make provisions for buying a vehicle, your ability to finance a car during an open Chapter 7 bankruptcy depends on the lender you're working with.
Subprime Lenders and Chapter 7 Bankruptcy
When you're in a bankruptcy, you should know that your credit score is taking a hit. This means you're not likely to have the good credit score many lenders are looking for in order to approve an auto loan.
However, subprime lenders work with people in tough credit situations, such as bankruptcy, making them your best bet for car loan consideration in an open Chapter 7. Not all subprime lenders deal with bankruptcy auto loans, but there are many out there that can if you know where to look.
When it comes to getting an approval during bankruptcy, Chapter 7 can be a bit trickier due to its short short time frame, and the liquidation process it entails. It's important that you have all your ducks in a row, and work closely with your bankruptcy trustee to make sure that the process is done correctly.
Getting Trustee Approval
If you're ready to look for a car loan during your Chapter 7 bankruptcy, there may be a few things standing in your way, including trustee approval.
When you're in a Chapter 7 bankruptcy, you must have your trustee's permission to make large purchases. They can help you ensure your auto loan isn't going to be subject to liquidation.
Because of the potential for a new car loan to be included in your bankruptcy filing, some lenders may not be so willing to offer up a loan while it’s open. Instead, they prefer you to finish your Chapter 7 process – which typically takes four to six months – before you can be approved for an auto loan.
If waiting for your trustee's approval to get an auto loan isn't something you want to do, and you attempt to purchase or finance a vehicle on your own, you're risking defaulting on the terms of your bankruptcy. This means you could be guilty of bankruptcy fraud, and have your case dismissed. Additionally, you're going to be responsible for all the debts that would've been wiped away in a successful Chapter 7 discharge.
This is why it’s important to follow the correct procedure when you’re trying to get into another car loan – talk to your trustee before you make any moves.
Your 341 Meeting
Another thing that could come between you and an auto loan is your 341 meeting of creditors. This is a court-mandated meeting where your trustee and creditors are able to ask you questions about your bankruptcy case and debts.
Completing your 341 meeting is mandatory, and failure to appear could result in immediate termination of your Chapter 7. In some cases, you may be able to refile and attempt a second try at the process, but in other cases, you lose your right to file again.
If a bankruptcy is dismissed with prejudice, you may be barred from ever filing a Chapter 7 bankruptcy again.
Finding a Bankruptcy Auto Loan
Since no one wants to have to refile bankruptcy paperwork more than necessary, it's a good idea to know exactly what you're looking for, and why you need a vehicle. This information is key to helping your trustee give you the go-ahead, so that you can begin to look for a subprime lender for you.
Subprime lenders are found at special finance dealerships across the country, but as we mentioned, not all of them can work with bankrupts. To save time and energy looking for a lender, start right here at Auto Credit Express by filling out our car loan request form. After you do, we'll get to work connecting you to a local bankruptcy auto dealer from our network!