How to Get a Car after Filing for Bankruptcy
Get a new car after bankruptcy.
Cars can pick the worst time to break down. If you've just experienced bankruptcy, or are still in the middle of a Chapter 13 repayment plan, financing is going to be tricky. Improving your credit can help you get the car you need without jeopardizing your financial recovery.
Bankruptcy's Credit Effects
Bankruptcy does serious damage to your credit score, but it doesn't last forever. While bankruptcy remains on your credit report for up to 10 years (some credit bureaus delete Chapter 13 plans after seven years), the older the bankruptcy, the less impact it has on your credit score. If you can keep your credit clean for a year or two after bankruptcy, dealerships and lenders will be a lot more willing to work with you.
New Credit After Bankruptcy
You can start rebuilding your credit
long before the bankruptcy drops off your report. Many people find
that they can get a low-limit or secured credit card soon after their
bankruptcy. If you keep your balance low (under 30% of your total
credit limit) and make your payments on time, your credit report, and
score, will improve, making it easier to get car financing.
Chapter 13 Repayment
If you are still in Chapter 13, you must get permission from your bankruptcy trustee before taking out a car loan. He or she will want to know why you need a new car and how you propose to pay for it while meeting your repayment obligations. Talk to your trustee or attorney about your options, and be prepared to document your need for the car as well as its costs.
Working With a Dealer
Be suspicious of dealers who claim that they can get financing for "anyone": You may end up with a car loan that you can't afford and end up in the same predicament as before. Check out the reputation of dealers and finance companies online and through the Better Business Bureau before working with them. Don't let dealers perform a credit check until you've had a chance to talk to them about your bankruptcy (be prepared to show them your discharge letter). Credit inquiries hurt your credit score, so keep them to a minimum by interviewing dealers first and then working with the dealership you like best.
Comments 2 comments
- Getting your First Post-Bankruptcy Car Loan
Plenty of lenders will want to offer you money at outrageous rates, says the Bankruptcy Adviser, but good deals are available if you look hard enough.
- Buying a Car During Chapter 13 Bankruptcy
The bankruptcy trustee will carefully examine your need, but if you're not extravagant, it's likely to be approved, says the Bankruptcy Adviser.
- Getting a Car Loan After Bankruptcy
You can always apply for a car loan, but after bankruptcy, it may be difficult actually securing one. Get the answers you need about car loans at Bankrate.com today!
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