Getting A Car Loan After Bankruptcy

Buying a car after bankruptcy can be an unexpected necessity.

Financial duress can hit you at any time, causing you to wonder if an auto loan after a bankruptcy is even possible. Once these marks reach your credit reports, they are difficult to remove. Unfortunately, it puts you on the wrong end of creditors and has a devastating impact on credit reputation.

Fortunately, consumers who have filed bankruptcy no longer have to settle for traditional lenders. Bankruptcy does not have to be the end of the line when it comes to your credit. We understand that sometimes the only solution is to file bankruptcy and start over. Of course consumers with a recent bankruptcy who have been through the process know that getting a car loan after bankruptcy is easier said than done.

Bankruptcy does not always make things better. People buying a car after bankruptcy or trying to refinance a car loan after bankruptcy know this.

What Is An Open Bankruptcy?

An open bankruptcy is a new bankruptcy that is a pending case. Once you have filed the bankruptcy papers, that case is automatically considered open until the court makes a decision.

Can I Get A Car Loan During An Open Bankruptcy?

Open or Pending bankruptcies will put a freeze on your potential to get a car loan. Any new credit at this point can be detrimental to the outcome of your pending bankruptcy case.

What is the difference between a chapter 7 and a chapter 13 bankruptcy?

Chapter 13 Bankruptcy

The major difference between a Chapter 7 bankruptcy and a Chapter 13 bankruptcy is the amount of time each takes to complete.

Chapter 7 bankruptcy requires you to liquidate your assets and pay your creditors with the proceeds. This process usually takes several months.

On the other hand, Chapter 13 bankruptcy can take between three and five years to discharge since you work out a repayment plan with your creditors with the help of a bankruptcy trustee.

Buying a car after Chapter 7 is relatively straightforward. You just search for a bad credit lender or car dealer that will give you a car loan after bankruptcy even while you are in the bankruptcy process.

If you have difficulty finding a bad credit auto lender who will give you a car loan, your bankruptcy adviser should be able to lead you to a local auto loan lender willing to sell you a car loan, and that are accustom to working with car loans after bankruptcy. However, many of these auto loan lenders operate their business like a Buy here Pay here dealer, so making the payments could get inconvenient.

Open bankruptcy auto financing is difficult? However, many companies offer bankruptcy auto financing, and there are many used car dealers specialize in auto loans after the bankruptcy is no longer pending.

The only drawbacks are that car loans and refinancing car loan after bankruptcy will likely require a substantial down payment on the vehicle, and the bankruptcy will result in a higher interest rate on the car loan.

Car Loan After Chapter 7 Discharge

A Chapter 7 bankruptcy file will stay open anywhere between three and four months.

Before any bad credit auto lender considers your chapter 7 car loan application, you must have a meeting with your creditors. This is called a 341 meeting. It gives creditors listed on your bankruptcy papers a chance to ask a few questions about your current debts.

No lender is going to consider your car loan application or any bankruptcy auto financing until after this meeting for several reasons.

  • After the meeting, you will no longer be able to add additional debt to the bankruptcy petition. This way no new loan can be discharged in that bankruptcy case process.
  • If your claim for bankruptcy was dismissed by the court, you would still be obligated to repay the chapter 7 auto loan.
  • Creditors must comply with the bankruptcy terms. This means your listed debts are null and void, thus lowering your debt to income ratio.

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.

Bankruptcy Auto Loans

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,

  1. 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.
  2. 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 an 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!

Valley Auto Loans’ Can Find Bankruptcy Car Loans For You!

Getting a decent line of credit is a daunting task even without bankruptcy. If your credit report scores are not exemplary, lenders consider you a risk. You end up either hit with high rates or rejection.

Some consumers wait it out, knowing in time the bankruptcy should no longer (allegedly) affect standing with lenders and credit bureaus when applying for a bankruptcy car loan. This delay can last anywhere up to seven years or more.

Valley Auto Loans can show you the best ways to avoid the standard channels that would keep you from buying a car after chapter 7 or 13. We use a simple application that is submitted online.

We accept all applications, and there is no charge for our service to you. Then we will review your car loan request with our pool of finance lenders.

Unlike traditional financiers, our network of lenders does not believe anyone should be penalized because misfortune put them in a less than perfect financial position.The lenders that can best match your offer will send you offers to choose from.

With any bankruptcy auto loan, more information may be requested by the lenders interested in making you an auto loan offer, and you are not required to accept any loan offers made to you.

Car loans after bankruptcy discharge is not a luxury. For some, it is a necessity, making many aspects of your lifestyle easier to maintain.

Don’t Settle for Less with Bankruptcy Auto Loans

A bankruptcy will have an impact on your creditworthiness with lenders.

What’s truly regrettable is how we let bad credit history or bankruptcy affect how we see ourselves.

Financial institutions and car dealers are going to see you as a risk when applying for buying a car after bankruptcy, because of the bankruptcy, but you should not see yourself as such.

Most people coming off a bankruptcy and looking for financial help tend to approach the situation as I will take whatever I can get. If you are looking to get your hands on a car, that attitude leads to loans from car dealerships with high-interest rates and maximized monthly payments regardless if you are looking for bankruptcy or post-bankruptcy auto loans.

Unfortunately, many people with bad credit and bankruptcy, get in over their heads to get the car they want. For instance, a 2009 study by the Center for Responsible Lending 1 revealed almost $26 billion paid into car payments as a result of inflated auto loan rates. Many of those paying consumers ended up losing the vehicle when they could not maintain the high payments.

Most people who file for bankruptcy do so out of necessity.

They are typically honest, hard-working people with a good track record for making their bills on time. Despite bankruptcy, you deserve a chance to own a decent car with proper financing for the car purchase.

Valley Auto Loans has an extensive network of reputable bad credit and bankruptcy auto loan lenders that are ready to help you. We can help you get a pre-approved car loan after bankruptcy that you can take to a dealership.

In fact, with a pre-approved auto loan, you can get a new car the way you are meant to. With the confidence and assurance that you’ll be treated like anyone else with good credit looking for a new car.

Tips for Getting Car Loans After Bankruptcy

  • Instead of getting a new car bankruptcy car loan, consider a used vehicle. Today’s pre-owned vehicles are more dependable than ever as even a model a few years old will be technologically advanced. These cars will have a lower price tag, offer lower interest and insurance rates, smaller payments and will likely be easier to maintain with any current budget thus bringing you back to a good credit rating faster.
  • Paying your auto loan on time every month is going to show creditors that you are responsible. Valley Auto Loans gives you the opportunity to rebuild your creditworthiness and make a new start through our auto loan program. A number of things make up your credit score, but poor credit auto loans or bankruptcy are critical factors. Paying your auto loan on time every month is going to show creditors that you are responsible. Despite any black marks in your financial history, you are a dependable consumer that pays their bills regularly. An Auto loan after bankruptcy carries a lot of weight with the credit bureaus and your auto credit score.
  • Filling out a loan application for buying a car after bankruptcy. Valley Auto Loans is a great online resource for finding you the best lender ready to help you get a chapter 7 or chapter 13 car loan. Make sure you fill out all the application fields and don’t leave any blanks. You can get behind the wheel of a car despite Chapter 7 or Chapter 13. We can help you acquire a bankruptcy car loan starting today! A car loan after bankruptcy may not be as easy as you hoped, but we can help you find the lender that it right for you.

Car Loans after bankruptcy are challenging, not only to find but also to pay for. If you are lucky enough to get a finance  lender to to offer a auto on after bankruptcy, they will probably charge a higher APR than you should

Sources and Citations:

  1. http://www.responsiblelending.org/payday-lending/research-analysis/payday-puts-families-in-the-red-final.pdf