When your car finally breaks down for good or your lender repossesses it, it is hard to see how you can get to work each day and keep up with your bankruptcy hearings and other obligations. You need a car, but who would be willing to give a loan to someone filing for bankruptcy?
While it can be difficult to finance a car during an active bankruptcy case, you may still be able to get a car loan if it's necessary and if you can afford it. As with all major transactions, make sure that you obtain permission from the trustee and bankruptcy court first before you proceed.
How Can a Car Loan Affect My Current Bankruptcy?
If you take on new debt during a bankruptcy case, you must get approval from the trustee so they can assess whether this will affect your ability to honor your monthly payments. If you are struggling with your payments, it is unlikely that a new car loan will be approved.
However, it is always ideal to wait until your discharge is complete before purchasing a car while your bankruptcy case is pending.
Is the Car a Necessity?
If you truly need a car out of necessity, the bankruptcy court will generally approve your purchase, as long as it is a reasonable vehicle. Purchases such as luxury cars could raise some red flags.
Tips on Getting a Car Loan During Bankruptcy
You shouldn’t expect the latest model or a great interest rate, but it is possible to get something to drive during bankruptcy if you know where to look. Here are some ideas to help you think about possible solutions to your specific situation:
- Find a Specialized Car Dealer: Because bad credit is such a common issue, many lenders specialize in providing loans to people who have dealt with bankruptcies. If you are approved for a loan, you can expect a high down payment and/or a high-interest rate. It is your responsibility to make sure you can afford the monthly payments.
- Look for a Junker If you can pay cash for a car from a used car lot or a private seller, you can avoid the financing process altogether.
- Use a Co-Signer: If you do decide to buy a car, a friend, parent, or well-to-do relative can make things easier for you by cosigning your loan or by actually obtaining the loan themselves. The car would then be in their name, and you can make payments on a basis that you agree upon.
The Law Office of Julio E. Portilla P.C. is always available to answer your questions. Feel free to contact us.