There are dealers and lenders that can assist you with a bankruptcy auto loan, but finding them is the tough part. We can help you find one, but first you should understand the types of dealerships you could be working with, and how to buy a car during an open bankruptcy.
Types of Bankruptcy Car Dealerships
Direct lenders, such as banks and credit unions, don’t usually offer financing to consumers with an open bankruptcy. These lenders usually see this type of loan as too big of a risk.
In order to finance a vehicle during an open bankruptcy, borrowers typically need to work with one of two types of lenders:
- Subprime lenders – These lenders work through special finance dealers, and specialize in helping credit-challenged buyers get financed. These lenders run credit checks, so they see the bankruptcy on your credit reports, but they consider your application if you can provide a down payment, proof of income, proof of residency, and a working phone. In some cases, they may also ask for a cosigner, so it's a good idea to have one available, just in case.
- Buy here pay here dealerships – Buy here pay here dealers are also lenders, and finance the cars on their lots in-house. Most don’t run credit checks, so they aren’t concerned about your bankruptcy. As long as you have the income and down payment to afford an auto loan, you shouldn’t have an issue getting approved.
Buying a Car in an Open Bankruptcy
If possible, you should wait until your bankruptcy is complete before you finance a vehicle. Unfortunately, this isn't always possible, and you may find that you need a car while your bankruptcy is still open.
No matter which type of bankruptcy you file, you must get permission from your trustee and the court before you finance a vehicle. Without it, you’re breaking the terms of your bankruptcy, and it could be dismissed if you’re caught doing so without the court’s approval.
As for the odds of getting approved for an auto loan during an open bankruptcy, it depends. If you filed a Chapter 7, you have little chance of getting a car loan while it’s open. Lenders know the Chapter 7 process typically only takes a few months, so they prefer if you wait to apply until it's discharged.
The likelihood of getting approved for an auto loan during an open Chapter 13 is higher. Lenders know it takes years to complete one, and things can happen during that time. As long as you have a valid reason for needing a vehicle and get the approval – called an order to incur additional debt – from the court, it's possible to get financed when it’s still open.
Ready to Find a Bankruptcy Dealer near You?
Not every dealership works with bankruptcy auto loans, but we can connect you to one that does if you need to finance a vehicle. At CarsDirect, we help car buyers get connected to local dealers that have the lending resources to handle various credit situations, including bankruptcy.
To get the process started, simply complete our auto loan request form. It's free of cost and obligation.
