Can You Get a Car Loan While In Bankruptcy?
Whether you filed for chapter 7 bankruptcy or chapter 13, qualifying for a car loan while in bankruptcy is possible. Although, there are specific rules you have to follow depending on what chapter you filed.
Car Loan While In Bankruptcy Chapter 13
For a Chapter 13 Bankruptcy, a portion of your monthly income is deducted to pay your creditors under a payment plan established by the court. The payment terms are from three up to five years. In order to obtain a car loan while in a bankruptcy chapter 13, you must have an authorization from the trustee of your case allowing you to acquire new debt.
It’s important to protect both the debtor and the car loan lender through a trustee authorization. It is a way to make sure that you will not default in the payment plan. In addition, if the trustee is aware of the loan then the lenders are safe from the risk of being added into the debtor’s list of creditors.
While the authorization is a requirement if you want to apply for a car loan while in bankruptcy, it is in no way an assurance that you will get a loan. It is recommended to apply for a car loan after two to three years after filing for bankruptcy in order to increase your chances of obtaining one.
Car Loan While In Bankruptcy Chapter 7
If an individual is heavily consumed in debt, and there’s no way for them to repay it, then they usually apply for chapter 7 bankruptcy. Your debts are legally wiped out under Chapter 7. In exchange, the person in debt must give up his assets to a trustee. The trustee will be in charge of liquidating or selling the assets and disbursing payment to your creditors.
Getting a car loan while in bankruptcy Chapter 7 is easier than if you filed Chapter 13 for the simple fact that debtors often receive discharge of most of their debts. Your income, down payment, and record of credit is the most important thing a lender looks for when being approved for a car loan.
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