How To Buy a Car During Chapter 7 Bankruptcy

Some people think that if you are in a Chapter 7 bankruptcy, it would not be possible for you to buy a car or get a car loan. You can actually buy a car but would just need to fulfill more requirements.

  1. Before considering buying a car during a Chapter 7 Bankruptcy status, find time to talk to your bankruptcy lawyer. Clarify the rules that apply to buying a car, and your actual status so your bankruptcy application will not be affected. You might need to reaffirm any of your existing car loans during bankruptcy. The option to continue to pay your car loan is usually still available to you. Since most vehicles do not have equity, this is entirely exempt. Your car loan payments have to be made but you need to reaffirm or redeem the car to keep it.
  2. In a Chapter 7, a debtor's assets are liquidated and the money is given out to secured debtors. For you to be given a car loan, you need to comply with the 341 meeting included in the bankrupt procedures. In the 341 meeting, a trustee appointed by the court confirms the information you provided in your schedule of debts and affirms your assets’ value.
  3. If you have completed the 341 meeting, you can start looking for a lender. Lenders first check if you have completed the 341 meeting before proceeding to process your car loan. Search for lenders who are knowledgeable in the procedures for bankruptcy and who willingly give car loans to someone in bankruptcy.
  4. Start asking a credit union, your local bank or you can search online. Look for at least three car loan lenders you can negotiate with. Auto Credit Express and Washington Auto Credit at are just two of the companies specialized in this type of loan.
  5. Gather information on the procedures and requirements of each lender. It is recommended that you personally meet with your potential lenders to have the chance to discuss details regarding your bankruptcy and have the opportunity to negotiate a better contract. Be conscious that you may be penalized for your bankruptcy status. You are expected to pay higher interest rates, but can still negotiate for an interest rate comparable to those given to consumers who are not bankrupt. The condition may be, you pay a higher down payment. If you prefer an online lender, make sure the company specializes in car loans in bankruptcy. Gather as much information about the company before providing details.
  6. Choose the lender that offers the best terms and rates. Complete the application with the lender, submit the requirements need and wait for the lender’s approval.
  7. Once you receive the positive approval for a car loan and have confirmed the terms of your loan, shop around for a car that fulfills the requirements of the approved loan. Make sure you do not buy a car that will cost you a significant amount to maintain or repair. Look for a car that is within your budget and fits your needs.
  8. Buy the car that you can afford, setting your expectations lower, since most lenders usually do not lend enough for you to purchase a brand new car.
  9. Submit to your lender, all the required information about your car purchase.
  10. Focus on re-building your good credit so you can later have more options to purchase another car later.


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