Auto Loan After Bankruptcy

Bankruptcy can be a hard financial hit for anyone, whether they have their assets liquidated completely to pay off their creditors, or whether they’re put on a strict payment plan under the supervision of a trustee. No matter what, however, you can get an auto loan even after a tough bankruptcy. It’s really just a matter of what kind of loan and from whom.

First of all, it’s undeniably true that your credit will be damaged by a bankruptcy. Bankruptcy for individuals in the US generally comes in two forms; the first is a Chapter 7 bankruptcy, where your assets are sold by the government to pay off your creditors, and the second is a Chapter 13 bankruptcy, where some assets might be sold off, but mostly you’ll be paying off your debts through a structured payment plan.

Either way, though, a bankruptcy on your record is not something a lender really wants to see, and it’s going to affect what loans you can get. Remember, for lenders, it’s all about how likely you are to pay back the money they’ve loaned you, and you have something on your credit report telling them you have trouble doing exactly that.

This doesn’t mean an auto loan is impossible to get with a bankruptcy on your record, but it does mean you’ll have to think carefully about who you’re getting it from and how it fits into your finances.

First, you’ll have to speak with your trustee about why you’re applying for a car. Despite what you may hear online, most bankruptcy trustees are willing to listen to your requests. It will help if you can demonstrate that your current car isn’t meeting your needs right now, and if you can demonstrate that you need a car to get to work–to earn the money that will help you pay off your debts.

That said, you need to be realistic and economical about what you’re looking for. The more modestly priced the car, the more likely your trustee is to approve your purchase. So, aim for something that will fit your needs, and more importantly, will fit into your budget with the payments that you need to make to discharge your debt.

Once you’ve got that worked out, start looking at lenders. Don’t assume that the first lender you find is the only one that you should consider; even with a bankruptcy on your credit report, there are many lenders who are willing and able to work with you. Especially with a bankruptcy to deal with, you should be looking for the car loan that offers the lowest interest rate at the shortest term.

Once you have the loan selected, you can work with your trustee to buy the car and make sure you can stay on plan.

Above all, remember during this process that you can, in fact, get a loan, even if you’ve just gone through bankruptcy. Don’t let a personal setback now keep you from getting on the road and getting past it to a better future.

Comments are closed.