Finding a Bankruptcy Auto Loan

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


, - February 24, 2020

If you’ve filed bankruptcy and weren’t able to protect your car through a motor vehicle exemption, you may be wondering if it’s possible to get a loan during an open bankruptcy. This isn’t always easy, but it’s far from impossible. However, it may depend on the type of bankruptcy you filed.

Personal Bankruptcy Types

Typically, when an individual files bankruptcy, they file either a Chapter 7 or a Chapter 13. A Chapter 7 bankruptcy is a short process, usually lasting only four to six months, during which your court-appointed trustee sells your non-exempt property, which could include your car, in order to repay your creditors. A Chapter 13 bankruptcy is a longer process, lasting three or five years, in which you’re given a chance to repay at least a portion of your debts through a repayment plan.

It may be possible to get an auto loan during both types of bankruptcies, depending on your lender. However, most often, lenders prefer to wait until the bankruptcy is discharged if you filed a Chapter 7.

During a Chapter 13 bankruptcy, on the other hand, there’s a process in place designed to help you get the vehicle you need. Lenders know that a lot can happen in just a few years, and that it's possible another car might be needed before three or five years has passed.

Getting a Car Loan During Bankruptcy

Getting a vehicle during an open bankruptcy can be a tricky process, especially during a Chapter 7. Many lenders choose not to offer loans to borrowers in this situation as a precaution. In some cases, a new auto loan can end up being included in the bankruptcy, which isn't a good situation for lenders.

This isn't the case with all lenders, though, but to qualify for car loan consideration during an open Chapter 7 bankruptcy, your 341 meeting of creditors has to be completed. Additionally, you can only have one bankruptcy on your credit reports in order to get a loan during an open Chapter 7.

In order to get an auto loan during an open Chapter 13, there's a specific set of steps you have to take, beginning with finding a bankruptcy car dealership, which typically works with subprime lenders.

The next step is to fill out a sample buyer's order with the dealer. You have to present this paperwork to your trustee for approval, so it has to include very specific information including the year, make, and model of the vehicle; the total cost of the loan; the monthly payment; and the highest possible interest rate you might qualify for.

Also, the dealer needs to list "or similar" next to your car selection. This is because the process of approval from the court can take a while, and if the vehicle you selected has been sold, you're free to select another similar model as long as they included this wording. Without the "or similar" listed, you have to begin the process from scratch if you return to the dealer and find your car has sold.

Once you have your sample buyer's order, you bring it to your trustee for approval. If they agree with your reason for getting another vehicle, feel you can afford it in addition to your repayment plan, and you have a sample buyer's order, they file a motion to incur debt with the court, which the judge either approves or denies.

Find a Bankruptcy Auto Lender

No matter which personal bankruptcy type you file, you have to work with the right kind of lenders if you need an auto loan during an open bankruptcy. Not all lenders provide bankruptcy car loans, and those that do may not be so easy to find on your own. That's where CarsDirect comes in.

We work with a nationwide network of special finance dealerships that work with subprime lenders. These lenders specialize in helping people who are struggling with poor credit, no credit, and bankruptcy to get the auto loans they're looking for. It's easy to get the process started if you need to find a bankruptcy car loan – simply fill out our zero-obligation auto loan request form.

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Meghan Carbary has been writing professionally for nearly 20 years. A published journalist in three states, Meghan honed her skills as a feature writer and sports editor. She has now expanded her skill-set into the automotive industry as a content writer for Auto Credit Express, where she contributes to several automotive and auto finance blogs.


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