Wondering how bankruptcy car loans work? Bankruptcy can happen to the best of us. Our financial situation can be unpredictable because of our job or business. Thankfully, our laws allow us to start over. Now, there is a multitude of ways you can pay back debts and loans. With these, you can continue living a normal life without having to worry about creditors.
Unfortunately, there is a catch. After bankruptcy, your credit rating takes a hit. Car dealers will be able to see this in your credit history. Bankruptcy is a disadvantage to anyone wanting to get a loan for a car.
Because your credit has suffered you may be wondering how you could ever be a candidate for bankruptcy car loans. You may think you have to go through many rejections or settle for bankruptcy car loans that are not ideal for you. Well, stop there! There are many services you can use that will offer you a loan that suits your needs and budget, even after going bankrupt.
There are low-interest companies that work with a network of lenders and car dealers to find the best deals for people looking for bankruptcy car loans. Knowing your financial setbacks are only temporary, they will help you get back on your feet. The fact is, no matter what issues you are having now, these will not be made easier by not having a car.
Before shooting off to the nearest loan sharks and local lenders, let’s go through chapter 7 and 13 of bankruptcy. With this, you’ll know everything you need to about getting bankruptcy car loans. You’ll also get to grips with all the details and know all the options available to you.
Table of Contents
- Chapter 7 and Chapter 13 Bankruptcy Car Loans
- What Happens After a Chapter 7 discharge?
- Chapter 13 Bankruptcy Car Loans
- How to Get Chapter 13 Bankruptcy Car Loans
- The Truth About Bankruptcy Car Loans
- Tips for Bankruptcy car Loans
Chapter 7 and Chapter 13 Bankruptcy Car Loans
Whether you are filing for a chapter 7 or chapter 13 bankruptcy, there is one thing that does not change. With the case still open, you are going to find it hard to get one of the many bankruptcy car loans available. Your open bankruptcy case will freeze your potential to get a car loan. But don’t worry, this will give you the time to pay your past creditors.
With this in mind, let’s focus on the differences between these two types of bankruptcies. Chapter 7 bankruptcy takes several months to complete. whereas, chapter 13 bankruptcy might take 3 to 5 years. The main difference is the amount of time it takes to close each case. With a chapter 7 bankruptcy, you’re required to pay your debts as quickly as possible. Your nonexempt assets will be on the line because you have to pay the debts quickly.
Chapter 13 bankruptcy takes years to get the case closed. It involves a reorganization of your payment plan. This type of bankruptcy was designed for people with a regular income. They can still pay their debts but they need more time. They can catch up on their mortgage or car loan payments without getting rid of their other assets.
Earlier, we mentioned that a pending bankruptcy case freezes your potential to get bankruptcy car loans. That doesn’t mean you should stop searching through the many dealers to find the best option for you. You can still find car dealers and financing companies that specialize in working with customers in your situation. Why? Because you’ll be able to get the ball rolling once your case is closed.
What Happens After a Chapter 7 discharge?
Keep in mind that chapter 7 filings stay open for 3 to 4 months. Before lenders consider you for bankruptcy car loans, you must have a meeting with your creditors. The creditors listed on you bankruptcy papers will ask the relevant questions to help you with the process.
The main reason for this is that the lender will know that you are less likely to be able to take on extra debt. Remember, while the bankruptcy case is open you will most likely not get a loan. You need to clear all your debts before applying.
Chapter 13 Bankruptcy Car Loans
Your bankruptcy attorney can help you with this. He can offer you some advice on how to go about getting a bankruptcy car loan. There is a specific process you need to follow to get your loan. This is because, if you are undergoing a chapter 13 bankruptcy case, you are most likely still in the repayment period. Obviously, if you are planning to take out a car loan after bankruptcy you are adding another debt to the list.
If you want to go for a car loan after a chapter 13 bankruptcy, you need to work with your court-appointed trustee and auto lender to get approval. Once you’ve met the court’s requirements, you’ll be able to see what your maximum interest rate is and what the biggest loan you can get is. The trustee will then decide if you need the loan before the bankruptcy case is finished. If he/she thinks you can wait until the bankruptcy case is closed, you won’t get the loan.
Most financial advisors say you need to wait until the second year of your bankruptcy before taking out a loan. This will help avoid an accumulation of debt. You’ll also have a better financial standing once you’ve already paid off some of what you owe.
Either way, you still need to get approval from the courts. This will make it easy for you to get one of the bankruptcy car loans out there. And, lenders and car dealers will have peace of mind knowing your financial situation is looking up. If you do not have approval from the court, it’s unlikely you’ll find a lender that will offer you a loan.
How to Get Chapter 13 Bankruptcy Car Loans
Courtrooms and judges recognize that a car is a necessity to most people. That applies to anyone, no matter what your financial situation is. But, everyone still needs to stick to the rules so you need to make sure your finances and papers are all in line.
As you are already paying off old debts, the judge is going to want to see a pretty good reason for taking out another loan. You need to explain your reasons clearly and compellingly. I.e. you need to give them a really good reason for needing that car.
There are many reasons a court would deem it fit for you to get a bankruptcy car loan. Maybe your old car is becoming unreliable or all the repairs are adding up and it would be more financially viable for you to buy a new one? Whatever the reason is, make it good and most importantly make sure it is the truth.
If the judge deems your reason for needing a bankruptcy car loan feasible, you will be asked for details about the interest rates and your proposed repayment plan. The judge may set restrictions on the loan you are allowed to get and the interest rates you can take on.
This process will only take place after you have requested a filing in court. It is called Motion to Incur Additional Debt. If the court accepts the filing and your request, the judge will issue an Authorization to Incur Additional Debt. You can show that to the lenders as proof of your qualification. The lenders will be more likely to approve your loan because you have the go-aheadead from a court of law.
The Truth About Bankruptcy Car Loans
It is true that lenders treat customers who have a bad credit rating as higher risk. Despite wanting to make sales, lenders still need to make profits from their investments. They want to make sure that customers have the ability to pay their debts.
However, they know they can’t just deny every customer who comes into financial difficulty. Some customers want a loan even when they are still in a bad financial situation. That doesn’t mean they can’t make small payments towards a smaller loan.
To cover their backs and continue getting customers, auto lenders up their interest rates. Be warned: some unscrupulous lenders also provide less than average deals to customers. They know that people looking for bankruptcy car loans can be desperate so they take advantage of them.
Some customers accept the ridiculously high-interest rates. Some even forget to look at the incredibly high monthly payments required. These are two common mistakes desperate customers looking for bankruptcy auto loans make. In the long run, their credit rating suffers more. They get into a vicious cycle.
Avoid this! You deserve a decent car with reasonable interest rates and monthly payments. You do not need to take the first deal that comes your way. Keep in mind that lenders are salesmen. They always need customers.
Tips for Bankruptcy car Loans
Remember, you can always find a good deal when you’re searching for bankruptcy car loans. You shouldn’t settle for anything less. Once you’ve realized that, you should aim high and always try and get the best deal. During your search, keeps these tips in mind:
Consider a Second Hand Car
Pre-owned cars can still be dependable. There are several reasons why opting for a second-hand car is best, especially during or after your bankruptcy case. These include:
- Lower prices
- Lower interest rates
- Lower insurance rates
- Lower monthly payments
So do you remember why you filed for bankruptcy in the first place? Yes, that’s right. To start over. With bankruptcy car loans, you can slowly build up your credit rating. Aside from that, you can have access to a car immediately. You will be able to save money in the long run while building up your credit rating. It will also help you show your creditors that you are taking your financial responsibilities seriously.
If you’re looking into buying a second-hand car, make sure to:
- Go for low mileage
- Look at the condition of the car
- Check how many owners it has had in the past
- Check the repairs history
Ask for help
Negotiating deals can be overwhelming. If you are already under financial pressure it can be easy to get stressed and make mistakes. Getting professional help could help you make the right choice and save you money in the long run. At Car Loan Cash Now we make it easy for customers to get bankruptcy car loans. We do the negotiating for you so you don’t have to.
Not only do our services offer customers better deals but we pre-screen lenders so our clients don’t get overcharged. Our lenders have years of experience working with bankruptcy car loans.
Car Loan Cash Now is ready to help customers regardless of their credit history. We work hard to find the best deals without our customers going through any unnecessary stress. We provide instant financial relief for those who want to have their own car as soon as possible. Contact us today to find out more about the bankruptcy car loans we offer.