A discharge of bankruptcy takes a jackhammer to your credit rating. Having had your bankruptcy discharged wipes away a portion of your debt, but also schedules payments to repay, to some extent, all of the people to whom you owe money. These credit accounts stay on your credit report for seven years, and your credit scores will reflect that. Trying to get an auto loan after bankruptcy is next to impossible since you are in a legally defined position of having a tight budget. Lenders have to have confidence in your ability to pay off an auto loan, and a discharge of bankruptcy is a sign that you may not be able to do that.
Getting an auto loan after bankruptcy is a matter of being able to afford it. This involves making your financial status known to a court appointed trustee as well as a lender. The trustee is appointed to make sure that you’re making your scheduled payments to your bill holders before you start pouring money into a high-end purchase. The terms of your bankruptcy settlement demand that you make all of your financial activities known to the trustee, any changes to your current income, and any new lines of credit you’re attempting to open.
The trustee has a certain amount of latitude in determining your spending habits. This means that they can set limits on what you pay per month on an auto loan. This means that your budget for cars will be extremely tight and under strict scrutiny. Your repayment of creditors will be the priority after your basic living expenses (food, clothing, shelter, medicine, etc.) are taken care of. You will have the responsibility of reporting any changes in your finances, and income, to your trustee and he, or she, will make the final determination if you’re in the right place to get an auto loan.
Bankruptcy is a major road-block to getting an auto loan. It puts a stain on your credit report that lasts for seven to ten years depending on the chapter under which you filed. Lenders who see the list of creditors to whom you owe money will tend to believe that you’re unable to pay off an auto loan. They will require proof of income, may require a co-signer, as well as references that can assure your financial fitness to make good on the debt. If you’re choice of cars is unrealistic, that will certainly mean you’ll be denied.
Buying an economical used car may be your only option. Don’t let your vanity get in the way of your car buying decisions. If you need transportation to make it to work, you will have to settle on the lowest cost car possible that can still give you some reliability for daily commuting. Realistic expectations are your only option if you’re to navigate your way successfully past bankruptcy. Many used cars on the market have standards of reliability close to that of new cars, depending on where you buy. Economy cars offer, not only a lower price tag, but lower running, and maintenance, costs.
Economy will be your way of life until you’ve put bankruptcy behind you and have recovered your financial health. Realistic expectations include minimizing your expenses, living with and sticking by a budget, and seeing that all of your debts, discharged under your bankruptcy, are paid on time and it full. The path to an auto loan after bankruptcy is in making your purchase with frugality in mind. Your options will be limited, but they will be there. Until all the obligations of your bankruptcy are met, you’ll be on a tight financial leash.