If you're wondering about getting a car loan now that you've filed for bankruptcy, we're here to tell you it's possible – in some cases. This largely depends on the type of bankruptcy you file, and whether or not you're working with a bankruptcy auto lender.
Chapter 7 vs. Chapter 13 Bankruptcy
It's a little easier to get a subprime car loan if you're in a Chapter 13 bankruptcy rather than a Chapter 7. A Chapter 13 bankruptcy lasts for three or five years, and lenders know that a lot can happen to a vehicle in that time.
It's still possible to get another car in a Chapter 7, but it's rarer due to the short duration of this bankruptcy filing, as a Chapter 7 generally only lasts between four and six months. Additionally, lenders want to be sure that a new auto loan doesn't get included in a bankruptcy, something that could cost them a lot of money.
A Chapter 7 bankruptcy is known as a liquidation bankruptcy. Your court-appointed bankruptcy trustee is responsible for liquidating – or selling off – any non-exempt assets in order to pay off your lenders. Any debts that remain unpaid after your bankruptcy is finished are wiped away with the discharge.
A Chapter 13 bankruptcy, on the other hand, gives you an opportunity to repay at least part of your debts over the three- or five-year period, and allows for more wiggle room when it comes to getting another vehicle during your open bankruptcy.
Getting a Vehicle During Chapter 13 Bankruptcy
Because you're working to repay your creditors in a Chapter 13, you first need to talk to your trustee about getting another car. If they think it fits into your budget without affecting your repayment plan too much, you're allowed to proceed.
To start your car buying journey during an open Chapter 13, you work with a dealership to find a vehicle that fits your budget, then you get a buyer's order. The buyer’s order must list every aspect of the sale, such as: make and model of car, sales price, tax, title, and license fees, any additional fees, and the maximum interest rate you might qualify for.
The dealer must also note "or similar" next to your vehicle choice. Court approval – which is the next step in the process – can take a while to get, and there's a chance that the car you choose may sell before you get the green light from a judge. This designation allows you to choose something similar and proceed with your application for a bankruptcy auto loan. Without it, you have to restart the process.
The Key to Bankruptcy Auto Loans
If you're unable to wait until your bankruptcy is discharged to get your next vehicle, you have to have the right lender for the job. Not all lenders work with people in an open bankruptcy. So, how do you know where to start?
Turn to the experts at Auto Credit Express, that's how! We work with a large network of special finance dealerships all across the country that are signed up with lenders that assist bankrupts. If your trustee has given you the go-ahead, you can start your path toward another car right now by filling out our fast auto loan request form. Then, we'll get to work matching you to a local dealer that wants to help.
