Here at Auto Credit Express, we often get questions about how to finance a car while in a Chapter 13 bankruptcy, such as this one:

“I am currently in a Chapter 13 bankruptcy. Is it still possible to get financing for a car?”

The short answer is yes, you can still get financed while in a Chapter 13 bankruptcy. You’ll just need to get the court’s approval, which could take some time.

The Steps to Take

A Chapter 13 is a type of bankruptcy that’s designed to eliminate past debt by carrying out a repayment plan. It can last either three or five years, and the debtor must have enough disposable income to file for a Chapter 13. Because a Chapter 13 lasts longer than a Chapter 7 bankruptcy, filers may find themselves needing a car before it’s completed.

How to Finance a Car While in Chapter 13When you begin the process of financing a vehicle during a Chapter 13 bankruptcy, there are three steps you’ll need to take:

  1. Find a lender – The first (and possibly the most difficult) task is to find a qualified lender and dealer willing to work with you. If you have a relationship with a bank or credit union, start there to see what they can offer. If they’re unable to offer you financing, the next best place to look is a subprime dealership. These dealers work with lenders that specialize in bad credit financing, and are qualified to help you find financing if your credit is poor. Once you find a dealer, choose a vehicle, and work out the terms of your loan, you’ll need them to write up a buyer’s order.
  2. Visit your trustee – Next, you’ll take the buyer’s order to your bankruptcy trustee. There, you’ll fill out paperwork explaining why you need the vehicle. This is where picking a reasonable car is important – trustees won’t approve your request if you’re trying to finance a luxury vehicle.
  3. Wait for the court’s decision – The last step is to wait for the court’s decision. Your trustee will file a Motion to Incur Additional Debt with the court. The information will also be sent to creditors involved in your repayment plan. The creditors have a right to object the motion if they feel it’s not necessary. If one or more objects, you could be asked to attend a hearing. If the court approves the motion, they'll give you an Order to Incur Additional Debt. You’ll take the paperwork to the dealer (or lender) and continue with the car buying process. If you’re denied, you may need to consider a different vehicle, or wait until your bankruptcy is further along.

Start With Us Today

It can be difficult finding a dealer willing to work with someone in a Chapter 13 bankruptcy. If you’re ready to find financing, but aren’t sure where to turn, let Auto Credit Express lead the way.

We work with an extensive network of special finance dealers that have the lending resources available for people who are struggling with credit issues, including bankruptcy. There’s no obligation or cost for our service. Just fill out our auto loan request form to get started today.