After completing a bankruptcy, your credit score likely has seen better days. When you’re looking for a bad credit car loan in Chicago, you have options after bankruptcy – even with a tarnished credit score.
Differences Between Chapter 7 and Chapter 13 Bankruptcy
There are a few key differences between the Chapter 7 and Chapter 13 bankruptcy filings. With a Chapter 13, you create a repayment plan, with the help of your bankruptcy trustee, in order to repay at least a portion of your debts.
With a Chapter 7, your non-exempt property is liquidated to pay off as much debt as possible. Exempt property is property you get to keep during bankruptcy. Exemption limits vary by state, and some states even allow you to choose between state or federal exemption guidelines. However, according to the legal website Nolo.com, in Chicago and the rest of the state of Illinois, you must use the state exemptions.
The time that bankruptcies remain on your credit reports differs, as well. With Chapter 7, the bankruptcy remains on your reports for 10 years from the date you filed, while a Chapter 13 remains for seven years from the date you filed.
Another key difference is the time it takes to get discharged. With Chapter 7, since you’re liquidating your property, the bankruptcy usually gets discharged between four and six months from the start date. That’s compared to Chapter 13, which takes either three or five years until any remaining debt is discharged.
With either bankruptcy filing, you can apply for a bad credit car loan once you receive your discharge papers. Getting an auto loan in Chicago after a bankruptcy doesn’t have to be difficult, and it helps to know what to expect.
Getting a Bad Credit Car Loan After a Bankruptcy Discharge
After a discharge from either a Chapter 7 or Chapter 13 bankruptcy in Chicago, you can almost immediately apply for a car loan with a subprime (bad credit) auto lender.
When you’re car shopping after bankruptcy, the two biggest things to prepare for are getting your discharge papers and putting together a down payment. You must bring your discharge papers to the dealership, as a discharge doesn’t typically show up on your credit reports for at least 30 days after the bankruptcy is completed.
Bad credit auto lenders use more than your credit score to determine approval, including a down payment. A down payment not only helps you pay less overall, it shows the lender that you’re committed to completing the car loan following a bankruptcy. With a bad credit auto loan, lenders typically require a down payment of at least $1,000 or 10% of the vehicle’s selling price.
Here are some of the other stipulations subprime lenders use to determine approval:
- Income – Minimum monthly income of at least $1,500 to $2,500 (before taxes), proven with recent computer-generated check stubs.
- Employment – Been on the job for at least six months to one year, as well as having a three-year work history with no gaps in employment longer than 30 days.
- Proof of residency – The more stable your living situation, the better. Bring a current utility bill or bank statement with your address, in your name.
- Proof of working phone – A landline or contract cell phone bill for a phone that must be in your name; prepaid cell phones don’t count.
- Valid driver’s license – Meaning your license can’t be suspended, revoked, or expired, and it must have your current address listed.
Every subprime lender is different, and depending on your unique credit situation, they may require more or fewer items to consider you for approval. Those listed are the most commonly requested items by bad credit lenders.
Where to Find Bad Credit Car Loans in Chicago
Getting a car loan after bankruptcy can be stressful and discouraging if you’ve been turned down by traditional auto lenders. Here at Auto Credit Express, we’re connected with lenders across the country, including the Windy City, that work with bad credit borrowers and people in unique credit situations.
We want to help you find a subprime lender in your local area for a post-bankruptcy car loan. To get started, simply fill out our free auto loan request form.