Bankruptcy stays on your credit report for seven years after you file, which is a fact that can impact both how likely you are to get a loan and the interest rate you’ll get. Most people assume that you have essentially no chance of getting a good car loan after Chapter 7 bankruptcy, but this isn’t always the case. Here’s everything you need to know about getting auto loans after Chapter 7 bankruptcy.
Are you considering filing for bankruptcy? Contact a bankruptcy attorney today to discuss your situation.
How long should I wait after filing for bankruptcy to get an auto loan?
Filing for bankruptcy is a legal process, and every bankruptcy case takes time to complete. You’ll need to take several steps before you can file, including the following:
- Confirm you can discharge your debts – Suppose taxes and student loans make up the majority of your debts. Since bankruptcy filings don’t usually discharge these debts, filing for bankruptcy won’t help. However, if most of your debts involve credit card debts, a mortgage, and other loans, you may be able to resolve your financial issues by filing for bankruptcy.
- Verify your eligibility – Suppose you recently moved to a new state. You may not meet the state’s residency requirements for filing bankruptcy.
- Complete a credit counseling course – Courts typically require individuals filing for bankruptcy to complete an approved course six months or less before filing.
Once you file, you must wait for your bankruptcy petition to work its way through the courts. The courts can take up to six months from the filing date to discharge your bankruptcy.
Auto loans for bankruptcy Chapter 7 filers are typically unavailable until a predetermined period following the bankruptcy’s resolution has elapsed. You may need to wait one or two years to qualify for the loan you need to buy a car. How long it takes to qualify depends on the lender, your down payment, and any steps you’ve taken to repair your credit since resolving your bankruptcy.
Set your budget and save up for a downpayment.
You can improve your chances of qualifying for post-bankruptcy auto financing by improving your financial situation. Lenders favor applicants with large down payments because this reduces their risk of losing money on the loan. Applicants who can save sufficient down payments also demonstrate they can manage their money and make monthly payments.
Free financial tools are accessible online. You can use these tools to set up a monthly budget and track your expenses. Tools such as BudgetPulse or Strands can help you identify unnecessary or duplicate expenses, control your monthly budget, and prevent overspending.
You can do some other things to improve your odds of qualifying for a loan after bankruptcy. Lenders consider factors such as how long you’ve been at your current place of employment and how long you’ve been at your current residence. Long-term employment with the same employer and residing at the same address for a long time are signs of stability that lenders find reassuring.
Working with a credit repair company with a good reputation or using a credit builder loan can help you improve your credit. However, making consistent monthly payments and reducing your debt load are essential steps to take when rebuilding your credit after bankruptcy.
Another step you can take to improve your financial health involves obtaining a copy of your credit report to identify issues negatively impacting your credit. You may be able to have some of these factors resolved and removed from your report. Resolving outstanding credit issues can help you improve your credit score.
Factors to consider when getting a car loan after bankruptcy.
Although there are things you can do to improve your financial health after bankruptcy, you may still face challenges when you apply for post-bankruptcy auto loans. If you do qualify for auto loans, you may find some or all of the following apply to your loan offers:
- High-interest rates – A high APR rate increases the amount of interest you’ll pay on your loan.
- Long-term loan periods – Long-term loans spread loans out over several years, increasing the amount of interest paid during the loan’s lifetime.
Lenders favor applicants with good credit, and you may not qualify for a loan from conventional lenders. You may only qualify for a loan from a predatory lender charging excessive interest rates.
There are plenty of places that regularly give auto loans to people who have declared bankruptcy, which means you have options. While you may feel somewhat awkward asking what different places can offer you, make sure you do. Don’t just take the first offer you’re given or you could end up paying a lot more than you need to in interest. Plus, those who pay higher interest rates are more likely to get behind on their payments and have their car repossessed, something you definitely don’t want to happen to you.
Look at credit unions
Most people go with one of the big banks for their auto loans, but there are several good reasons to check out your local credit union. Because they’re based in your local community, they have a good understanding of the financial climate and are therefore more likely to be flexible with the loans they’d be willing to offer. This is particularly true in areas where everyone is having a hard time, such as towns where one or more of the major employers has closed its doors. If you have a good track record of paying your bills either before or since your bankruptcy, your local credit union could be your best bet.
Don’t expect luxury
While you certainly don’t need to only look at clunkers, be modest in your expectations of what kind of car you’ll be getting. You’re much more likely to be approved for loans that are below a certain price, and cars below that price are much more likely to have interest rate caps.
Chapter 7 bankruptcy doesn’t have to put a damper on your plans to get a new car. Talk to the most experienced Chapter 7 bankruptcy lawyer in Las Vegas to learn more about what you can expect by calling DeLuca and Associates today at (702) 710-0513.
Take your search online
Over a million new bankruptcy cases are filed in the United States every year. This means that millions of other people are also looking for the best options for car loans after a bankruptcy.
Comparing vehicles and financing options online is a good start. The internet can also connect you with digital communities where people are discussing and finding solutions to this issue. Online forums can be good places to ask questions and get information on lenders. Social media platforms such as Facebook allow users to create groups focused on specific subjects.
Look for like-minded bankruptcy groups where people are talking about the best options for buying a car. Exploring the internet and social media allows you to draw on the experiences of people from around the country. Of course, not everything you read online is accurate or helpful. Be sure to thoroughly research and confirm everything.
Be careful with second chance lenders
Once you start shopping for a car, you will likely find dealers who are all too happy to sell a vehicle to someone who has gone through bankruptcy. It is important to be cautious and pay close attention to the details of any auto loans after Chapter 7 offered by so-called second chance lenders.
Some car dealers offer in-house financing. They will often use low monthly payments to mask high interest rates and long loan terms. If the length of your loan is going to exceed the life of the vehicle, you should probably shop somewhere else. If you are buying a used car, make sure you know its full history. Some sellers will buy worn-out, high-mileage vehicles at auction, give them an exterior clean-up, and then attempt to unload them at a profit to unsuspecting buyers. Take the time to shop around and compare offers.
How a Chapter 7 bankruptcy attorney can help you
Facing bankruptcy can be overwhelming and frightening. Fortunately, there are several options individuals with financial challenges can consider, and choosing the right option can help you restore your financial health.
You’ll learn about all your legal options when you consult an experienced Chapter 7 bankruptcy attorney. We’ll go over the benefits and disadvantages of each option and make sure you utilize available exemptions to keep permitted assets. We’ll answer all your questions, ensuring you have the information you need and can make an informed decision about how to proceed. Your Las Vegas bankruptcy attorney from DeLuca & Associates will help you complete the steps required to discharge your bankruptcy successfully.
Contact our Las Vegas Chapter 7 bankruptcy lawyer today so you can begin your journey to financial health.
Montoya, R. (2021). How to Buy a Used Car in 10 Steps.
O’Neill, C. (2023). Filing a Chapter 7 Bankruptcy: Basic Steps.
Riley, C. (2011). Bankruptcies top 1.5 million in 2010.
Smith, C. (2022). Can I Get a Car Loan After Bankruptcy?