While it's possible to buy a car while in an open Chapter 7 bankruptcy, you may not want to. Finding financing during this process is hard, due to the liquidation of assets. Plus, if you have enough cash to buy a car, it may jeopardize your bankruptcy.
Your Assets in Chapter 7 Bankruptcy
A Chapter 7 bankruptcy is a liquidation bankruptcy which typically lasts only three to six months. You’re required by law to tell the court about any and all property you own, so that your assets that are non-exempt can be sold or “liquidated” by your bankruptcy trustee. The profits from the sale goes to paying off your creditors.
Whether you own a car outright or are financing one, you may be able to keep it, as long as its equity is under the vehicle exemption amount of your state. Exemptions allow you to keep a certain amount of property, which a trustee can’t sell to pay off your creditors. A vehicle of moderate value, along with your primary residence (in most cases), and other exempt items can typically be kept during the bankruptcy process. The amount of exemptions varies by state, but according to Lawyers.com, exemptions usually include:
- Some or all of the equity in your primary residence
- A modest amount of equity in a vehicle
- Clothes and household necessities
- A certain value of tools for work
- Retirement accounts that qualify for exemption
Other exemptions may exist in your state that allow you to protect other personal property. You can go over what is and isn’t exempt where you live with your bankruptcy trustee.
Financing a Car in a Chapter 7 Bankruptcy
If you’re in the midst of a Chapter 7 and find you need a vehicle, it’ll be difficult to find a lender to work with. This is because any financing you get during an open Chapter 7 bankruptcy can be included in the liquidation process. So, in the case of requesting a car mid-Chapter 7, your best bet is to ride it out. You’ll find it much easier to get auto loan once your bankruptcy has been discharged.
Find the Right Lenders After Bankruptcy
Once your Chapter 7 bankruptcy has been discharged, you’ll come away from the process with a clean slate, though your credit will be lower than before you filed. Even with the hit your credit score has taken, there are lenders available to help people who’ve completed a bankruptcy, and here at Auto Credit Express, we can help you find them.
We work with a large network of special finance dealerships all across the country that work with the lending resources to help people with bad credit, no credit, and bankruptcy get the cars they need. The process is simple, and there’s never any obligation. Just fill out our free, easy, online auto loan request form, and we’ll get to work matching you with a local dealer!