If you need an auto loan, a bankruptcy that has not yet been discharged can often make buying a vehicle extremely difficult. In fact, many people believe that it is impossible to purchase a vehicle before a bankruptcy is discharged. While it is difficult, it is not impossible. Regardless if you are involved in a Chapter 7 or a Chapter 13 bankruptcy (chapter 11 bankruptcies are for businesses), you may still be able to purchase a vehicle. There are lenders that make bad credit loans to people in the middle of a bankruptcy. You may also qualify for a credit union car loan—if you have a long standing relationship with the institution. Regardless of your bankruptcy situation, you can improve your chances of success if you follow some of the tips below.
Don't Apply Unless Really Necessary
Before planning to buy a vehicle during your bankruptcy, be sure that you truly need the vehicle. If you honestly need a vehicle to commute back and forth to work or basic transportation for your family, you can proceed with attempting to purchase a vehicle during your bankruptcy. However you should be aware that the judge or trustee appointed to your bankruptcy case will probably scrutinize the purchase and may choose to throw out the purchase.
Select the Right Time
If you are filing for Chapter 7 bankruptcy, make sure that you have finished the initial 341 meeting where a trustee examines all of your debts and assets. Most lenders will not even consider you for a loan during bankruptcy—until this meeting has been completed. If you are involved in a Chapter 13 proceeding, you should wait until the trustee has set up your initial budget of debt repayment.
Regardless of the type of bankruptcy you're involved in, you should always make sure you get the permission of the court before attempting to purchase a vehicle during bankruptcy. If the judge or trustee finds out that you’ve purchase a vehicle without his/her knowledge, he/she may force you to surrender the vehicle and may even dismiss the bankruptcy proceeding—which could cause additional problems.
Shop for the Right Lenders
When choosing a lender, you should shop for loans just as you would at any other time however you'll need to concentrate your search on lenders that specialize in providing car loans during a bankruptcy. You can visit websites like WashingtonAutoCredit.com and AutoCreditExpress.com as these lenders are well versed in helping people purchase a vehicle during a bankruptcy.
Be Reasonable When Choosing a Car
If you are granted permission to purchase a vehicle before your bankruptcy is discharged, and you find a lender willing to provide a loan for the vehicle, you should be very selective about the type of vehicle you purchase. The lender that makes the loan will probably require that you purchase a vehicle that is priced low enough where the lender has sufficient collateral in the vehicle to completely cover the amount financed. If you want to purchase a more expensive type of vehicle, you'll probably be required to come up with a substantial down payment. If you have the money for a large down payment, the judge or trustee may refuse to allow the deal and require that you use the money to pay off existing debt.