Can You Finance a Car During Bankruptcy?
If you have recently filed for bankruptcy, you may have had to sell your car to pay off your other debts. This is often the case if you own an expensive vehicle. However, you still need a car to get to and from work and to help your family get around town. In this situation, you might be wondering what the procedure is for buying a car during bankruptcy when your assets have been sold off to pay your debts. Here's what you need to know.
Determine Your Eligibility
Your ability to finance a car during bankruptcy will depend on which type of bankruptcy you filed and where you are in the bankruptcy process. In Chapter 13 bankruptcy, you'll agree to repay some or all of your debts over the next three to five years, and you'll often be able to keep some of your assets. Because of this, you'll need the permission of a judge or court-appointed trustee in your case in order to buy a car. You'll need to demonstrate that you absolutely need the vehicle to go about your day. Otherwise, your judge or trustee is unlikely to approve your request to take on additional debt.
In Chapter 7 bankruptcy, you'll liquidate your assets, possibly including your car, to pay back as much of your debt as possible. The amount leftover will be dismissed at the end of the bankruptcy. The discharge process typically takes about four to six months from the date you file for bankruptcy, after which you'll have what is known as a 341 hearing to close your case. You may be able to get an auto loan before your bankruptcy is discharged, but you'll likely have better luck with lenders after your case is resolved. You should still seek approval from your judge or trustee before making the purchase, though it is not explicitly required in Chapter 7 cases.
Shop Around for Suitable Loan Terms
After you have filed for bankruptcy, your credit score will drop significantly, which can make it more difficult to find a lender that is willing to work with you. There are, however, lenders out there that work with people who are bankrupt or have bad credit. It is important to note, though that you will likely pay a much higher interest rate for your loan than a standard customer would. You may also have to make a sizable down payment, which can be difficult when you are bankrupt. When shopping for your new car, try to pick a vehicle that is as affordable as possible to minimize your down payment and reduce the overall size of the loan. This isn't the time to go out looking for a luxury vehicle!
Here at Hometown Chevrolet, we have a variety of budget-friendly Chevy vehicles for you to choose from, and we'll work with you to help you find suitable financing to meet your needs. Reach out to us today to schedule a test drive and get the financing process started.