Difficult financial situations are never in our plans, so those who file for bankruptcy are often left with a lot of questions about what they can and can’t do once proceedings are completed. One of the confusing subjects surrounding bankruptcy is car buying. Individuals who file for bankruptcy and initially think they cannot buy a car will be glad to know that it is indeed possible. However, it’s important to understand how to best go about the process in order to stay clear of deeper financial trouble.
Will My Credit Score Prevent Me from Buying a Car?
Even though bankruptcy can affect your credit score for up to a decade after you’ve filed, that doesn’t mean that you cannot get a car loan. Actually, your credit score will likely be higher after bankruptcy than before you filed. Bankruptcy gives you a chance to essentially start over and rebuild your credit again.
Keep in mind that the opportunity to improve your credit score increases with time, so waiting as long as you can to buy a vehicle will help your chances of getting a better interest rate and terms. While it’s possible to receive financing for a car within six months of your discharge, the interest rate will likely be quite high at that point, which isn’t a helpful situation when your budget is already tight.
You may end up having more cash on hand after discharging your debts, and that can help with putting a down payment on a car. This will also help to decrease the interest rate. If you can completely avoid using credit to purchase a car and use all cash, that’s even better. Remember, if you’re in need of a car post-bankruptcy, make a wise purchase; don’t choose a car that’s out of the price range you can afford. Keep in mind the additional expenses that come with car ownership. Factor into your budget costs such as registration fees, insurance, and regular maintenance like oil changes.
Differences between Chapter 7 and Chapter 13 Bankruptcies
With Chapter 7 bankruptcy, you may get a car loan upon receipt of your discharge notice, which can take several months. Under Chapter 13 bankruptcy, a much longer process, you must receive permission from the bankruptcy court or the Chapter 13 Trustee to buy a car. Your best bet is to contact a bankruptcy attorney for guidance.
Tips for Buying a Car After Bankruptcy
You may find it challenging to find an institution that will lend you money for a car soon after bankruptcy. Here are some tips to help.
- Check your credit report and make sure it is completely up to date with all debts discharged and any mistakes corrected.
- Start rebuilding your credit by paying credit card bills on time.
- Find a car that simply suits your needs, and nothing more.
- If someone you know with good credit is willing to cosign your loan, it may help you get a lower interest rate. Check with the car dealerships to see if this will help.
Sawin & Shea Can Help You Buy a Car After Bankruptcy
Bankruptcy is a tricky situation to navigate, so don’t do it alone. Sawin & Shea, LLC can guide you through the process of buying a car post-bankruptcy. We’ll help you make the right decisions to help you get back on your feet. We are committed to providing compassionate and non-judgmental representation to all of our clients. Our attorneys have helped thousands of people just like you get the fresh start they deserve and the cars that they need.Speak to an attorney today at (317) 759-1483. Or contact us online.