To get an auto loan after bankruptcy keep these tips in mind.
What is Bankruptcy?
There are three kinds of bankruptcy, Chapter 7, Chapter 11 and Chapter 13. These names refer to the chapter of the federal statutes (the Bankruptcy Code) that contains the bankruptcy law. Read about bankruptcy's effect on your credit score.
- Chapter 11 is rarely used by individual consumers, as it is for large debts and is a complex, time-consuming and expensive process.
- Chapter 7 bankruptcy - sometimes called "straight" bankruptcy - allows you to eliminate most of your debts in exchange for property that is not protected by "exemption" laws. If you don't own much property, you may be able to keep what you have. The court will appoint a bankruptcy trustee who will sell this property and distribute money to the creditors. Whatever amount remains will be cleared.
- Chapter 13 bankruptcy allows you to rearrange your financial affairs, repay a portion of your debts and get control of your finances.
Can You Get an Auto Loan After Bankruptcy?
Yes, you can, but it may take a while for you to rebuild your credit to the point where you can get post bankruptcy auto financing. There are lenders who specialize in and are willing to lend to auto loan bankruptcy applicants. You should know that bankruptcy stays on your record for ten years. As a result, many people have to find an auto loan with bankruptcy on their credit record.
SmartCarCredit can help. Many of our lender and dealer partners have experience securing auto loans after bankruptcy. Just complete our easy application form ensuring you check the bankruptcy auto financing box. If you meet other lending criteria including minimum monthly income, several lenders on our network may extend you an auto loan for bankruptcy. Ready to get started? Get auto loan quotes.
Is there such a thing as Auto Loan Bankruptcy?
While high auto loan payments may push you into bankruptcy, there is no auto loan bankruptcy per se. While we’ll outline more alternatives below, if your auto loan payments are making you insolvent, consider refinancing your car. Auto refinance is increasingly common and can be a great alternative for reducing your monthly auto loan payments. If that’s not enough, consider selling your car and buying a less expensive one. The money you free up may help you avoid bankruptcy.
What are my alternatives to bankruptcy?
- Negotiate. If you have some income or assets you are willing to sell, you may be better off negotiating with your creditors than filing for bankruptcy. Negotiation can give you time to improve your financial situation or you and your creditors may agree on a complete settlement of your debts for less than you owe.
- Get Outside Help. In some situations, such as if your creditors are inflexible about negotiating with you, you can turn to a lawyer, a bankruptcy typing service or a nonprofit credit counselor such as Consumer Credit Counseling Service (www.nfcc.org).
- Stop Harassment. If you are mainly concerned about harassment from creditors, bankruptcy may not be the best way to stop it. Instead, you may be able to take advantage of federal and state debt collection laws that protect you from abusive and harassing debt collector conduct.
- Do nothing. A creditor cannot take away essentials like basic clothing, ordinary household furnishings, personal effects, food, Social Security, unemployment or public assistance. If you do not have much in the way of assets, your creditors may choose not to sue as the likelihood of collecting is low. They may choose instead to write off your debt. Write-off rates for some classes of auto loans run over 5%. Such defaults take become legally uncollectible at some point (depending on state law). In seven years, it will be removed from your credit record.
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Disclosure: We developed the content for SmartCarCredit™ while working with automotive industry clients. We hope you find it helpful in making informed decisions. While we believe the information to be accurate, we do not guarantee its accuracy.
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