Chapter 13 Car Loans During a Bankruptcy
When you have filed for Chapter 13 Bankruptcy, the process of buying a car after bankruptcy gets complicated. This is because you will be taking on additional debt with a chapter 13 car loans while you are in the repayment period.
The bankruptcy judge handling your case must agree to allow the chapter 13 auto loan to go through. If you do not get that agreement, you will not be able to get a chapter 13 car loan. This is where your bankruptcy attorney can offer some advice on how you should proceed.
Once you have the approval in hand, you will need to work with your court-appointed trustee and a bad credit auto lender to get a chapter 13 auto loan that meets the court’s requirements.
Bankruptcy car loan requirements during a chapter 13
This often includes the maximum amount of interest that can be charged as well as the maximum total amount of the loan. When you request approval for a new loan, your trustee must make several considerations.
They will need to consider if you need the money before the bankruptcy is finished. If it is concluded that you can wait until after the bankruptcy, then there is a good chance that you will not get approved. Many financial experts recommend that, if possible, you wait until you are in at least the second year of the Chapter 13 bankruptcy process before taking on a bankruptcy car loan.
What you do not want to do is go behind the back of your trustee or the courts and sign for a loan or get a straw purchase auto loan.
If you do not get permission before signing for a loan, then there is a good chance that your case will be dismissed, and your bankruptcy will be unsuccessful. Even if you were planning on trying to get a loan without permission, it is very unlikely that you would be able to find anyone who will allow you to sign for a loan.
The Chapter 13 process can be prolonged, lasting up to five years. Taking your income into account, the court will set up a payment plan for the interim. You are then responsible for those payments during the bankruptcy process. If you hope to get any new chapter 13 auto loan financing, you would need the court’s permission to do so.
Taking your Bankruptcy Car Loan to the Judge
In the case of a Chapter 13 bankruptcy car loan, the court will want to know why they should extend the courtesy of adding a chapter 13 car loan, essentially this will grow your current debt.
You can argue the case that your current vehicle is not reliable,
- Your family needs a reliable car. You can justify needing a second car by explaining how there are multiple people in the home that need to commute to work.
- You might also explain to the court you need the car for work, but another family member requires means to take the children about and deal with daily chores.
Your argument for auto loans after bankruptcy must be represented through a filing with the court, called a “Motion to Incur Additional Debt.”
After reviewing your filing, the judge is likely to have you in chambers to hear arguments. The judge will probably want to know about the potential bankruptcy car loan, its terms, including interest rates, and how you plan to repay it.
Even if you manage to get the bankruptcy auto financing approved, it will come with certain restrictions. The maximum monthly payment and interest rate can only be decided by the judge.
If the court does accept the motion for getting a car loan after bankruptcy, the judge will issue an “Authorization to Incur Additional Debt.”
This can be presented to your auto loan lender with a loan application. Lenders need this letter of approval because it is how they protect themselves from legal trouble and financial losses.
Even if you can get the auto loans after bankruptcy letter of approval, you might have another problem. The lender that you have found might not agree to the bankruptcy car loan terms that are set by the judge.
Chapter 7 or 13 Bankruptcy Auto Loans.
Once you have the proper paperwork in place for an auto loan after chapter 7, you will be on your way to a dealership. The challenge is to find an auto loan lender who will offer a car loan with bankruptcy status.
Many bad credit auto lenders will not choose to work with loans for people in bankruptcy. It takes an incredible amount of your time to apply over and over again to get a car loan after bankruptcy or car refinancing after bankruptcy, only to get rejected tie after time.
This is where Valley Auto loans can help!