When you file for a Chapter 7 bankruptcy, you may find that you have to give up your car in order to pay back your creditors, which can put a lot of stress on you, especially if you rely on it every day. With that in mind, it might be possible to get an auto loan while in an open Chapter 7 bankruptcy, but it may not be a good idea.
Chapter 7 Bankruptcy Basics
A Chapter 7 bankruptcy is considered a liquidation bankruptcy and usually lasts anywhere from three to five months. In order to pay back your creditors, a trustee sells your nonexempt property and assets. To qualify for a Chapter 7 bankruptcy, your monthly income must be less than or equal to the median income for a family of your size in your state, according to legal website Nolo.com. Once you file, you’re temporarily put on an automatic stay – this means your creditors can’t collect any debts you owe.
Just because you’re on an automatic stay doesn’t necessarily mean you get to keep your assets. If, after the creditor’s meeting, your trustee determines any nonexempt property (such as your car or house, depending on how much equity you have) can be sold, you’re required to give it up. Once you give up any nonexempt property and all of your debts are wiped out, you’ll receive a discharge. Remember, even though it’s been discharged, a Chapter 7 bankruptcy stays on your credit reports for up to 10 years from the day you filed. It’ll affect your credit score, but the more time that passes, the less impact the bankruptcy has.
Can I Get a Car During an Open Chapter 7 Bankruptcy?
If you have to give up your car, and you rely on it to get around, know that while it isn’t impossible to get financing when your bankruptcy is open, it’s best to wait it out. Unlike a Chapter 13, a Chapter 7 bankruptcy is short and only lasts a few months. Because of this, subprime lenders are more willing to consider financing once your bankruptcy has been discharged.
Some lenders may consider financing you during an open bankruptcy, but the reason why most are cautious is because you could include this debt in the liquidation process, and most don’t want to take this risk. If you need a car immediately, you can go to a buy here pay here lot, although your credit may not improve, and your choices may be limited to older, high-mileage vehicles
Getting a Car After Bankruptcy
If your Chapter 7 bankruptcy has recently been discharged and you're ready to finance a car, but aren’t sure where to start your search, don’t stress. Let Auto Credit Express help you find a dealer in your area. Getting started is simple. Just fill out our online auto loan request form today and we’ll get right to matching you with a dealer in your area.