One of the most common questions we get when discussing bankruptcy is, “Will I ever be able to get a car loan again?”
The answer is yes. And probably a lot sooner than you may think.
However, there is a lot of misinformation about there. I read an article this evening on a site that works with people in bankruptcy to get a car loan. You would think the information would be correct, since they purportedly work with people in bankruptcy, but there were some major red flags.
What Chapter Did You File?
If you file for Chapter 7, you can get a car loan as soon as 1 day after you file with some of the lending programs out there today. However, this article incorrectly states auto loans are not available during the Chapter 7 because “it’s possible for the car to be included in your bankruptcy, which could leave your lender holding the bag.”
That’s not how Chapter 7 works. Everything you own on the day that your bankruptcy is filed is what is included in your bankruptcy (also known as the bankruptcy estate). A car lender should never be left holding the bag because the loan is secured against the car. Bankruptcy doesn’t wipe out a secured loan and leave the lender “holding the bag.”
If you filed for Chapter 13 (which is a repayment plan over 3-5 years), you generally need trustee approval and there are often limits on the monthly payment and total amount that will be approved. Talk to your Chapter 13 attorney to make sure it’s a smooth process.
This article instructs you to bring your financing information to your bankruptcy trustee and that the trustee will present it to the court in a motion to incur debt.
You should bring your financing information to your attorney. The attorney will coordinate with the trustee’s office to get approval. Depending on your court, a motion is probably not required at all and the trustee is never the one who will file the motion – you or your attorney (if you are represented) needs to do that.
Finally, the article states that there may be a hearing and “if all of your debtors agree,” it will be approved. Again, no. First, you are the debtor and you have creditors. Second, all of your creditors do not have to agree or approve of your car loan.
The bottom line is that financing is available at almost any stage of the bankruptcy process, but it’s important to know your local procedures and work with your attorney to understand the steps that are required.
The article I read is here.
This is just a basic overview and is not legal advice specific to your situation. If you have questions about your rights when it comes to debt and credit, you should speak with an attorney in your area for legal advice. If you live in California or North Dakota and would like to speak with Jen Lee Law regarding your situation, please schedule an appointment on our scheduling site.