Can I Buy a Car After Filing Bankruptcy?

You can get a car loan after bankruptcy. Getting a car loan after bankruptcy has no relevance to the type of bankruptcy.

Credit Score

Bankruptcy remains on your credit for ten years. Your credit scores will drop substantially if you have been through any type of bankruptcy. Therefore if you want to get a car loan, the first thing you need to do is repair credit. Your credit is the main criteria lenders use to decide whether to give you a loan or not. It is not impossible to get credit after bankruptcy.

Getting Credit

The biggest misconception is that you cannot get credit after bankruptcy for at least two years. When you are buying a car after bankruptcy, you need to decide whether you should finance the car through the dealership or obtain outside financing. Obtaining finance through the car dealership may seem like a great idea, but this isn't necessarily the case. This is because a dealer will only offer its own limited range of loan products. There are lenders who specialize in providing car loans for people who have just come out of bankruptcy.

Why Lenders will Finance Your Car

There are reasons why lenders will offer you finance for your car.

• Bankruptcy has already reduced your unsecured debt. Now you are better placed to meet any future credit commitments because of a lower debt to income ratio.
• Lenders understand that after bankruptcy, you cannot seek to write off any repossession deficiencies under the same chapter for the next 8 years.
• Since you have just come out of bankruptcy, the lender can and will charge you a higher rate of interest.
• Your car will be the collateral for the loan and can be repossessed if you default.

An experienced bankruptcy attorney can be of immense help if you want to get a car after bankruptcy. He or she can assist you with credit repair and advise you on rebuilding your credit. Sometimes your bankruptcy attorney will have names of car dealers and lenders that will work with people who filed for bankruptcy. The attorney sends the dealer or the lender a letter that says that the bankruptcy has been through court and any future bills cannot be added so the car dealer or the financer is safe from debts being cancelled.