Bankruptcy is poorly understood by many consumers, even those looking at bankruptcy court to get through financial difficulty or personal cost issues. As a result, we tend to think major purchases are impossible, but in truth, you can finance a car, especially if you have a Chapter 13 bankruptcy.
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First of all, it’s worth remembering there are several different types of bankruptcy, generally named after the section of the law that applies to the bankruptcy process. Most commonly, we think of Chapter 7 bankruptcy, liquidation, as the only form of bankruptcy, where your assets are liquidated and used to pay off your creditors.
But many of us can opt for, and use instead, Chapter 13 bankruptcy. Chapter 13 allows individuals to keep some or all of their assets, depending on the ruling of the court and the nature of the debt, and puts your finances under the control of a trustee, to ensure you abide by a court-decided payment plan and to ensure that everything remains on track in a fiscal sense. It’s more of a debt consolidation plan administered by a legal body instead of a “straight” bankruptcy.
The question then becomes … can you get a car loan? The answer is yes, but financing a car in Chapter 13 bankruptcy will require a few more steps than your typical financing.
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Getting The Financing
First, you’ll need to speak with your trustee, both about the possibility of getting financing and what’s a realistic request the court will approve. This is not the time to try and petition for a luxury car; focus on a car that will efficiently and cheaply meet your needs. You may have to make the case that you need to buy a vehicle in the first place, so be sure to have handy an accounting of how you use your car, what you use it for, and why other possible options aren’t viable. It makes no sense to ride the bus, if your nearest bus stop is five miles from your house, for example.
Next, go to lenders and explain both your situation and what you’re looking for. Look especially at alternative lenders; they’ll better understand your personal situation and be able to offer you deals that more traditional lenders can’t or won’t put on the table. You might be surprised by what you find when you start looking for help; thanks to the tough economy and people working to get over the setbacks it handed out, lenders are approaching “subprime” lenders with a more open mind and offering better approaches to getting financing for the car you need.
Once you have financing lined up, now is the time to go car shopping. Again, be realistic; focus on the car that will get you where you need to go and fulfill the errands you need to run.
Above all, remember that it’s in both your trustee’s interest and yours to ensure that you’re behind the wheel. If you’re realistic, honest, and do your research, you’ll be in a new car in no time.