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Buying a Car Following Bankruptcy Filing

Buying a Car After Bankruptcy

One of the issues borrowers run into when trying to get approved for a vehicle immediately after filing their case is that their debts are not yet officially eliminated. While a filing does halt creditor collection attempts, the filing of a case doesn’t mean that all of your obligations have been wiped clean. You still need to give creditors time to object to your case and the elimination of the debt that you owe. From the time of filing until your case is closed can last anywhere from 90 to 120 days.

Financing a Car Following Bankruptcy

Buying a Car After BankruptcyIf your bankruptcy has recently been completed, you might be wondering if it’s a good time to buy a car. Some people are able to free up their income enough (due to discharged debts) that they can pay cash for a vehicle. Others will need a loan.

Despite having a previous bankruptcy, it is possible to receive financing after you file for bankruptcy – but that approval may come at a price. Lenders may be eager to extend credit even before you receive your discharge to take advantage of your financial standing by charging outrageous interest rates. Although you may be anxious to reestablish your credit, it’s important to take the time to look for positive opportunities and trustworthy lenders.


Financing a vehicle can most certainly help you re-establish your credit history. It gives you an opportunity to make on-time payments over an extended period on a significant debt, which contributes to a positive credit report. Financing is also the best option if you are not able to pay cash for a vehicle.


Unfortunately, many lenders see recent bankruptcies as an opportunity to take advantage of borrowers with poor credit and will charge interest rates as high as 29%.

However, bankruptcy in this day in age doesn’t carry the same type of stigma that it did 10, 20, and even 30 years ago. Even the more mainstream car dealers and lenders are open to doing business with those that have a bankruptcy on their report. If you can show that you have a steady and reliable source of income, it may even be possible to obtain a manageable rate of interest.

If you are interested in receiving financing for a new car, it’s a good idea to explore finance options and terms that credit unions, banks, car loan lenders, and dealers are willing to offer in your area.

When’s the best time to get a new car?

Whether you plan on paying for your new vehicle in cash or applying for a loan, it’s best to wait until your bankruptcy is dismissed and your case has been closed. This waiting period can vary depending on what type of bankruptcy you have filed for.

Chapter 7:

In a Chapter 7 bankruptcy proceeding, it is normal to get your Notice of Discharge from the clerk of course between 90 and 120 days after the court has met with your creditors.

Chapter 13:

Chapter 13 proceedings operate differently. Chapter 13 is a continuous case that generally takes between three and five years to satisfy. If you need financing for a new vehicle while you are in a Chapter 13, you will need to obtain permission from the court before you can purchase one. This will often involve filing a motion with the court. Contact your Chapter 13 trustee office for more information on how you can do this.

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