Preparing for a New Car Loan After Bankruptcy
Depending on whether you've gone through a Chapter 7 or Chapter 13 bankruptcy, there are a few things to keep in mind when getting ready to start shopping for a new car.
- Check your credit - Make sure you check that the bankruptcy discharge shows up on your credit reports, check for overall accuracy, and view your credit score to see where you stand before visiting a dealership.
- Prepare a down payment - The bigger your down payment, the less you have to borrow. Additionally, lenders will typically require a larger down payment for consumers with a recent bankruptcy.
- Cosigners can be a big help - If you don't meet all of the income or credit requirements for a new car loan by yourself, adding a cosigner will often tip the scales in your favor.
Chapter 7 vs. Chapter 13
Chapter 7 (Liquidation)
Chapter 13 (Reorganization)
Allows for the complete discharge or elimination of most unsecured debts, such as credit cards and medical bills.
Rather than a liquidation of assets and discharge of debts, Chapter 13 involves restructuring debt and creating a repayment plan.
Certain assets may be sold to repay creditors, though in many cases individuals are able to keep their home and/or car.
Chapter 13 repayment plan is typically structured to last between 3 and 5 years to complete, depending on income and level of debt.
Much quicker than completing a Chapter 13 bankruptcy, a
Chapter 7 typically takes 3-6 months - though it will stay visible on a credit report for 10 years.
Chapter 13 does not negatively affect credit scores as severely as Chapter 7, and remains on a credit report for only 7 years.
FAQs 
Is it difficult to get financed after going through bankruptcy?
Getting a car loan after bankruptcy is more complicated, but still possible. Approval may come with a higher interest rate and require a larger down payment.
How long after filing Chapter 7 can I buy a car?
It's possible to get a new car loan with an open Chapter 7, but it's unlikely. In most cases, you will need to wait until your Chapter 7 bankruptcy is discharged, which typically takes 3 to 6 months.
How long after filing Chapter 13 can I buy a car?
Once your Chapter 13 repayment plan is complete, getting a new car loan is pretty straightforward. If you need a new car sooner than that, however, there is a process in place for getting a car loan during an open Chapter 13 bankruptcy.
