In order to buy a car during an open Chapter 13 bankruptcy, you need to follow a specific process. It can be lengthy, and requires you to get permission from your bankruptcy trustee and the court. As long as you meet the trustee’s requirements and follow the proper steps, you can get approved for an auto loan while your bankruptcy is still open.
Step 1: Sample Buyer’s Order
The first step in the process of buying a car during an open Chapter 13 bankruptcy is to visit a special finance dealership and obtain a sample buyer’s order. You need to work with a dealer that has subprime lenders since they’re familiar with the car buying process during an open bankruptcy. Traditional lenders typically aren’t going to work with you in this situation.
How do you get this sample buyer’s order? Simply ask a salesman that works there. They pass the information to their special finance manager, who interviews you and fills out the paperwork.
The finance manager fills out a buyer’s order for you to take to your trustee, which lists the vehicle you’re planning on buying (with “or similar” next to it), its price, and maximum monthly payment and interest rate you might quality for.
Step 2: Get Trustee’s Approval
Once you have the sample buyer’s order, you need to take the order to your trustee. When you meet with your court-appointed trustee, they're going to ask you to explain why you need a car at this point in your bankruptcy.
Your trustee then looks at your existing bankruptcy repayment plan, and decides if you’re able to take on this additional debt while the bankruptcy is still open. If they deny it, they'll tell you why. If they approve it, they’ll petition the court for approval.
Step 3: Motion to Incur Debt
When your trustee approves of you buying a vehicle, they file a motion to incur additional debt with the bankruptcy court. This motion is sent to your creditors as well, and they have a chance to object to the motion. Depending on your bankruptcy situation, you may need to attend a hearing in order to get the motion approved.
The court then either approves or denies the motion. Sometimes, the court can make special requests regarding your auto loan – such as setting a maximum interest rate or loan amount – but this also depends on the court and your specific case.
If you’re approved, you’re given a copy of an order to incur additional debt, which you can take with you to the dealership where you got the sample buyer’s order and complete the car buying process.
Find a Local Dealership to Work With
Buying a vehicle during an open Chapter 13 bankruptcy can be tedious. However, as long as you prove to your trustee that you need a car, that it fits within your repayment plan, and the trustee agrees, it's possible to get the auto loan you need.
If you’re stuck on step one, and aren’t sure which dealer you should be working with, we want to help. At Auto Credit Express, we’re teamed up with a nationwide network of car dealerships that are equipped to handle challenging credit situations, including bankruptcy.
Our free service can connect you with one of them in your area. To get the process started, fill out our fast and secure auto loan request form.