A grey car stands in front of Chapter 7 bankruptcy documents

How to Get an Auto Loan While in Chapter 7 Bankruptcy

Milad Hassibi November 11, 2018

If you have begun the process of a Chapter 7 bankruptcy liquidation, you may have had to forfeit your car in order to repay your creditors and lenders.

Not having a car can be a great point of stress for many Americans, especially if you need a car to get to and from work on a daily basis.

Thankfully, it is actually possible to apply and get approved for an auto loan while in the process of filing for Chapter 7 bankruptcy. However, it may not be the best idea.

Chapter 7 Bankruptcy

Unlike Chapter 13, Chapter 7 is a form of bankruptcy known as “liquidation”, where a court-A man in bankruptcy in a white shirt thinks about getting an auto loan after filingappointed bankruptcy trustee sells your non-exempt property to help repay your creditors.

For somebody to qualify for Chapter 7 bankruptcy, their annual income must be below the state average.

From the moment you file, you will be put on an automatic stay, which means that creditors can no longer call you or harass you in an attempt to collect.

Getting an Auto During Chapter 7

If you are forced to give up your car but rely on it daily to get around, know that it isn’t impossible to qualify for an auto loan while in the early stages of filing for bankruptcy.

However, we recommend consumers wait on purchasing a car until after the bankruptcy process is finished.

If you are in urgent need of a car while in the middle of filing, speak to your bankruptcy trustee.

If your bankruptcy trustee feels you have the ability to repay, they will present their findings to the bankruptcy court, who will then decide to approve or deny your motion to incur more debt.

Most Chapter 7 filings will last from three to six months, a time frame where many lenders are reluctant to provide loans to consumers who are in the middle of filing.

It is recommended that you wait until your filing is finished in order to purchase a new car.

This is because many lenders do not want to take the risk of lending to somebody in the middle of filing for Chapter 7 liquidation.

If you are in urgent need of a car, you can always use a Buy-Here-Pay-Here dealership, although interest rates tend to be astronomically high.

Vehicles at these dealerships also tend to be much older with higher mileage.

Final Note

If you have had all of your debts discharged in bankruptcy and are now in need of a car, CrediReady can help.

Our nationwide network of trusted dealers and verified lenders work with buyers in all credit situations. Take a moment to fill out our free no-obligation loan inquiry form and start shopping for your dream car today!

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