When you’ve gone through bankruptcy, a car loan is a great way to rebuild your credit. Completing a bankruptcy successfully means you can typically get a car loan from a bankruptcy car dealer. But what if you need an auto loan before you’re done with bankruptcy?
A Car Loan during a Chapter 7 Bankruptcy
Whether or not you can get a car loan during bankruptcy depends largely on what type of bankruptcy you filed. It’s possible to get a car loan during a Chapter 13 bankruptcy, but if you filed Chapter 7, it’s less likely you’ll be approved for a vehicle loan while you’re in the process, mainly because it’s so short.
This bankruptcy usually only lasts between three and six months, and is known as a liquidation bankruptcy. In a Chapter 7, your trustee is responsible for selling (or liquidating) your possessions to repay your debts. Most remaining debts are then wiped out. Auto loans are typically not available during this process because it’s possible for the car to be included in your bankruptcy, which could leave your lender holding the bag.
An Auto Loan during a Chapter 13 Bankruptcy
A Chapter 13, known as a repayment bankruptcy, is a much longer process lasting three or five years and courts understand that an auto loan might be needed during this time.
The first thing you need to do is find a dealer who works with someone in a bankruptcy. Once there, you can work with the dealer to fill out a sample financing statement. This document must show all the details of your potential loan, including the term, monthly payment amount, total loan amount, maximum interest rate, and vehicle.
It’s very important that the dealer lists the highest possible interest rate you could get, as well as the phrase “or similar” with the vehicle. Without these, you’ll have to start the process from scratch if you receive a higher interest rate than listed, or the vehicle you selected was sold.
Once you have your sample financing statement in hand, you bring that to your bankruptcy trustee, who will review it and, if it makes financial sense, present it to the court in a motion to incur debt. The court can either approve or deny the motion, and you may have to attend a hearing to further explain your need for a vehicle. If all of your debtors agree, you’re approved and can then go back to the dealer to begin the finance process.
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Finding a Bankruptcy Car Dealership
Though bankruptcy can be a great way to start over with a clean slate, it definitely takes a toll on your credit. Because of this, you usually need a special finance dealer that has lenders available to handle the unique challenges of bankruptcy and low credit scores. Not all dealers work with these types of lenders, so it can be stressful and time-consuming going from dealer to dealer to find out.
Here at Auto Credit Express, we take to stress out of the equation. We work with a nationwide network of special finance dealers that have the resources needed to help you even in the midst of bankruptcy. We want to help get you connected to a dealer in your area, so what are you waiting for? Fill out our online auto loan request form today, so you can get to work on your sample financing statement with a local dealer ASAP!