Buying a Car with a Bankruptcy on Your Credit Reports

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - January 24, 2019

Filing for bankruptcy, and going through the bankruptcy process, isn’t easy. A bankruptcy can stay up to 10 years on your credit reports starting from the date you filed. Although its impact lessens over time, a bankruptcy on your credit reports affects your ability to buy big-ticket items, such as a car or house. The good news is not all hope is lost. You can still buy a vehicle with either a Chapter 7 or Chapter 13 bankruptcy on your credit reports – the key, in many cases, is finding a dealer who works with bankruptcies.

Buying a Car with a Chapter 7 Bankruptcy on Your Credit Report

A Chapter 7 bankruptcy, also known as a liquidation bankruptcy, typically takes three to four months to complete before it’s discharged. During this time, you may need to give up any nonexempt property, which can include a car, in order to pay back your creditors.

Because a Chapter 7 bankruptcy doesn’t last long, you may find it more difficult to get financing with an open Chapter 7. Subprime lenders like to see that a Chapter 7 has been discharged before considering financing, but some may be okay with the bankruptcy still open.

Buying a Car with a Chapter 13 Bankruptcy on Your Credit Report

A Chapter 13 bankruptcy, also known as a reorganization bankruptcy, lasts three or five years before being discharged. Instead of liquidating property, you pay back your creditors under a repayment plan. Because it takes longer to complete this type of bankruptcy, some subprime lenders are willing to consider you for financing while the bankruptcy is still open.

Ideally, though, if you can, you should wait until the bankruptcy has been discharged for better approval odds. One thing to keep in mind is that because a Chapter 13 bankruptcy takes years to complete, by the time it’s discharged its impact on your credit score is less than when you first filed.

The Bottom Line

Just because you have a bankruptcy listed on your credit reports doesn’t mean you can’t get approved for auto financing. You just need to know where to go, and when to apply for financing. If you’re in the middle of a bankruptcy, or have a bankruptcy that’s recently been discharged, and are ready for financing, let CarsDirect help. We connect car buyers to local dealerships with the lending resources to handle various credit situations, including bankruptcy. To get the process started, simply complete our car loan request form. It's free of cost and obligation.

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Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


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