Applying for Bad Credit Auto Loans during Bankruptcy

If and how you can reestablish your car credit by applying for car loans with bad credit during a bankruptcy

How we know

If you’re currently in a personal bankruptcy and need a car loan, you’re probably wondering what your bad credit car loan options are.

During the past 20 years, we’ve heard this from many customers here at Auto Credit Express, where our commitment to bad credit consumers extends to our web site featuring a car loan application – something we felt was necessary after seeing the disappointment and shame that customers with poor credit often feel when a car dealer doesn’t offer second chance auto loans.

And while these consumers can usually try a tote the note dealer, this won’t solve their car credit issues since these dealers usually don’t report loans or loan payments to the credit bureaus and these same loans often end up in repossession.

Bad credit car loans

Getting a car loan after bankruptcy usually means applying for a bad credit auto loan. But if you need reliable transportation before your bankruptcy has been completed a lot depends upon the kind of bankruptcy you’re in which, for most individuals, is either a Chapter 13 or a Chapter 7.

Bankruptcy

A Chapter 13 filing establishes a court-appointed trustee. The trustee sets up a payment schedule that must be adhered to during the bankruptcy, which is normally three or five years.

A Chapter 7 filing liquidates a debtor’s assets and distributes the proceeds to the unsecured creditors. A Chapter 7 is usually over in a matter of months and can only be done once every 8 years.

Since a Chapter 13 bankruptcy can last for a number of years, while a Chapter 7 usually lasts for a little more than four months, bad credit car lenders look at each type differently.

A Chapter 7

In a Chapter 7 bankruptcy, the first step to filing is the means test. If this test is passed, the next step is the 341 meeting of creditors. This is where the court affirms the value of your assets and the accuracy of the information contained in the schedule of debts.

The 341 meeting is important, because bad credit lenders will not even consider an application until this meeting has been held. While most lenders want a Chapter 7 to be discharged (due to the short length of time), there are also some who will look at an application provided the 341 meeting has taken place.

A Chapter 13

A Chapter 13 bankruptcy is entirely different. In order to apply for a car loan if you’re in a Chapter 13, you need to ask the trustee to petition the court for an order to incur additional debt. Without this order, you are not permitted to apply for any loans.

Since a bankruptcy appears on your credit report, any lender will be aware that you’re in a bankruptcy. Before even considering your application, they’ll request a copy of the order to incur additional debt. It not only gives permission, it also specifies the maximum amount the court will allow you to borrow and might also state the maximum interest you’ll be allowed to pay (a sticking point with many bad credit lenders).

The Bottom Line

Whether or not you will qualify for a bad credit auto loan during bankruptcy depends upon the type of bankruptcy, where you are in it, as well as your ability to secure an order to incur additional debt if you’re in a Chapter 13.

Auto Credit Express has helped thousands of people with bad credit buy cars and reestablish their auto credit at the same time using a nationwide network of dealers that specialize in bad auto credit.

So if you are serious about getting your auto credit back on track, you can begin the process now by filling out our secure online bad credit auto loan application.

Reference:
Auto Credit Express
[http://www.autocreditexpress.com/blog/2011/05/07/applying-for-bad-credit-auto-loans-during-bankruptcy/] – link unavailable when last checked
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