Where to Get a Bankruptcy Car Loan

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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.


, - February 22, 2019

If you’re dealing with an open bankruptcy and you need a car, you may be wondering where you can get an auto loan. You have two options to consider: a subprime lender that offers second chance car loans, or a buy here pay here (BHPH) dealer. Both can work with someone dealing with bankruptcy, but depending on the bankruptcy you file, one may be a better fit than the other.

Getting a Car Loan with an Open Chapter 7 Bankruptcy

Before you head to a dealership, whether a special finance or BHPH dealer, you need to meet with your bankruptcy trustee and complete the 341 meeting of creditors. Once it’s completed, you’re technically eligible to apply for auto financing, but you need permission from the court. If the court grants you permission after you’ve submitted a sample buyer’s order with the vehicle and maximum interest rate, you can move forward in the car buying process.

Be aware if you want to get a subprime auto loan that most of these lenders are going to turn you down, as they like to see that a Chapter 7 bankruptcy has been discharged before approving filers for financing. If you can’t wait to get a vehicle, a BHPH dealership could be your next best option.

These dealers loan in-house and don’t rely on third-party lenders to complete the financing process. BHPH dealerships also don’t run credit checks, so you can have an open Chapter 7 and still be able to get financing. You just need to meet a BHPH’s basic requirements such as income and down payment.

Getting a Car Loan with an Open Chapter 13 Bankruptcy

When you file a Chapter 13 bankruptcy, you and your trustee set up a three- or five-year repayment plan. Because it takes so long to complete, BHPH and subprime lenders are more willing to finance someone in an open Chapter 13. To get financed, like a Chapter 7 bankruptcy, you need to first go to a dealer and obtain a sample buyer’s order that lists the vehicle you want, the phrase “or similar” next to it, and the highest possible interest rate you might get.

From there, you take the order to your bankruptcy trustee and explain to them why you need this car. The trustee determines how much debt you currently have and how an auto loan fits into your repayment plan. If your trustee approves you, they file a motion to incur additional debt with the court. If the court approves the motion, then you can take the court order back to the dealership and complete the financing process.

Need Help Finding a Dealer to Work With?

If you’re currently going through a bankruptcy, and need help locating a dealer that can help you get the financing you need, we’ve got you covered. At CarsDirect, we help consumers get matched with a dealership that specializes in working through challenging credit situations, including bankruptcy. We've helped millions of people in the past, and you can be next if you start by filling out our auto loan request form.

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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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