In recent years, bankruptcy filings have grown in numbers. The reason behind this is the rising credit costs and high unemployment. When someone takes a decision to file for bankruptcy, they may file chapter 7. Chapter 7 will eliminate the debt by liquidating your assets and distributing the money to the creditors. There is another option. The individual may also file Chapter 13. Under the Chapter 13 process, the debtor is required to make a month to the creditors. The debtor will have 3-5 years to resolve the issue.
Obtaining credit while in bankruptcy can be somewhat challenging. However, it is not impossible by any means.
If you want buy a car when in bankruptcy, make sure to keep some of these things in your mind-
Understanding The Situation
This is the very first step. You must understand your situation first. Before you purchase a vehicle, confirm whether you filed for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Then you have to know how this bankruptcy will affect your credit. Your credit score will be badly damaged under Chapter 7 and 13 bankruptcy. Considering all of these facts, you can think about obtaining bankruptcy car loans.
Buying a Car When in Chapter 13 Bankruptcy
Before considering a car loan, it's a good idea to wait at least two years. It should give you a better chance of getting approved. However, if a car is necessary for you to generate money, you should definitely proceed with the loan approval process.
Bankruptcy law will allow you to take a new loan when you are in the middle of Chapter 13 re-payment plan. However, the authorization of the Chapter 13 trustee( someone who takes the money from the debtor and distributes it to the creditors) and the court is required. You must demonstrate that taking debt is absolutely vital for you to repay the money.
Your trustee needs specific loan terms in order to analyze. After locating the potential loan, your trustee will provide you paperwork to fill out and gain some information. The information you give will determine whether the income you generate can handle this new debt.
Keep in mind that your trustee may not approve a car loan that exceeds $15,000.
Buying a Car When You are in Chapter 7 Bankruptcy
Understand what will happen. Your non-exempt assets will be liquidated in order to pay back your debt. Non-exempt assets may include expensive clothing, jewelry, furniture, any additional car or other appliances. You won't have to make monthly payments. So your income won't be affected by it. However, you are also unable to buy a car as expendable cash will also be considered as non-exempt assets
Chapter 7 bankruptcies are generally finished within 3-4 months whereas Chapter 13 bankruptcy may take many years to get discharged. So it does not make sense for anyone to take loan while they are under chapter 7 bankruptcy. It will be wise for you wait it out. So taking a shot at chapter 13 is a much better option.