Car Loan While In Bankruptcy
Can You Get a Car Loan While In Bankruptcy?
Whether you filed for chapter 7 bankruptcy or chapter 13, qualifying for a car loan while in bankruptcy is possible. Although, there are specific rules you have to follow depending on what chapter you filed.
Car Loan While In Bankruptcy Chapter 13
In Bankruptcy Chapter 13, the court establishes a payment plan wherein you surrender to a court-appointed trustee your monthly income after deducting your living expenses to pay your creditors. The payment terms are from three up to five years. In order to obtain a car loan while in a bankruptcy chapter 13, you must have an authorization from the trustee of your case allowing you to acquire new debt.
The trustee authorization is important to protect both the debtor and the car loan lender. It is a way to make sure that you will not default in the payment plan. In addition, if the trustee is aware of the loan then the lenders are safe from the risk of being added into the debtor's list of creditors.
While the authorization is a requirement if you want to apply for a car loan while in bankruptcy, it is in no way an assurance that you will get a loan. To increase your chances of being approved for a car loan while in bankruptcy, consider applying after two to three years from the time you filed when you have paid most of your debt.
Car Loan While In Bankruptcy Chapter 7
People who are drowning in debt without enough means to pay may find bankruptcy chapter 7 the perfect solution to their debt problems. Bankruptcy Chapter 7 legally wipes out a person's debt. However, the debtor must surrender his assets that are classified non-exempt to a trustee. The trustee will be in charge of liquidating or selling the assets and disbursing payment to your creditors.
Getting a car loan while in bankruptcy Chapter 7 is easier than if you filed Chapter 13 for the simple fact that debtors often receive discharge of most of their debts. The important things the lenders consider in approving a car loan while in bankruptcy is the person's income, down payment and record of credit payment after bankruptcy.
You can apply for a car loan while in bankruptcy by approaching car dealers in your local area, car loan brokers, traditional car loan lenders or those who specialize in bankruptcy car loans.
Remember, to shop around and compare prices to get the best possible deal. Choose a loan with payment terms that will fit your budget. Finally, make sure to pay the monthly bill on time and make the most of a car loan while in bankruptcy to help rebuild your credit.
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