Bankruptcy Auto Loans
Bankruptcy auto loans are available through niche auto loan companies
that specialize in helping people get a car loan after bankruptcy. These
auto loan companies believe that individuals who get a car loan after
bankruptcy are more likely to pay on time because their debt obligations
have been greatly reduced through the bankruptcy.
There are two types of bankruptcies available to consumers to provide
relief from creditors - Chapter 7 bankruptcy and Chapter 13 bankruptcy -
both named after the statutory title of the US Bankruptcy Code under
which they were organized. The laws of bankruptcy are governed by the
Federal government and subject to US Bankruptcy Courts although state
laws are often applied when determining property rights. A person’s
ability to get a car loan after bankruptcy varies depending on the type
of bankruptcy filing.
Bankruptcy Auto Loans and Chapter 13 Bankruptcy:
A chapter 13 bankruptcy provides relief from your creditors by negotiating
a reduction in the principal and a monthly payment amount for your existing
debt. This also allows you to keep the underlying property at a more
affordable payment while protecting you from further legal action from your
creditors. Qualifying for bankruptcy auto loans is more difficult in this
scenario because the individual filing is still obligated for making monthly
payments on their debt obligations.
Car Loan After Bankruptcy and Chapter 13 Filing Requirements
A Chapter 13 bankruptcy is available to individuals who do not owe more
than $250,000 in unsecured debt like credit cards, or more than $750,000
in secured debt like mortgages or car loans. These high limits were
increased in 1994 to make Chapter 13 bankruptcy accessible to more individuals.
Secured debt:
Also known as collateralized debt, secured debt is secured with property
such as a mortgage, car loan, motorcycle loan or boat loan. If a borrower defaults
on a secured loan, the lender seizes the underlying property to recover
what is owed. Once an individual is contracted under a chapter 13 bankruptcy,
they are able to keep the property as long as payments are made on time.
Unsecured debt:
Also known as uncollateralized debt, unsecured debt includes items such
credit cards, medical bills and personal loans also known as signature loans.
Car Loan after bankruptcy and Chapter 13 filings:
Usually through an attorney, you will file for a chapter 13 bankruptcy through
a bankruptcy court in your district. You will be required to provide a list of
all your assets and liabilities, current income and expenditures and a statement
of your current financial affairs. There are certain properties you are allowed
to claim as exempt and keep. Terms are renegotiated with your creditors and you
will be required to make one monthly payment to a trustee who then distributes
the money to your creditors. Most chapter 13 bankruptcy plans require you to
repay your debts over a three to five year period with your first payment due
within 30 days after you file in court. If, in the future, you wish to get a
car loan after bankruptcy, you’ll need to get permission to get a loan from
your trustee.
Bankruptcy Auto Loans and Chapter 7 bankruptcy filings:
A chapter 7 bankruptcy provides relief from your creditors by allowing you to
discharge all or most debts and no longer be required to repay them. Because a
chapter 7 bankruptcy is subject to many exceptions, you should always seek
professional legal advice before filing. Getting a car loan after bankruptcy is
much easier in this scenario because most of a person’s debts are discharged and
no further payments are required.
How Chapter 7 Bankruptcy Works:
Usually through an attorney, you will petition for a chapter 7 bankruptcy
through a bankruptcy court in your district. You will be required to provide
a list of all your assets and liabilities, current income and expenditures
and a statement of your current financial affairs. There are certain properties
you are allowed to claim as exempt and keep.
Shortly after a petition is filed (usually less than 45 days) the trustee will
hold a meeting of creditors. During this meeting, you will be asked questions
under oath regarding your financial affairs and property and usually within 10
days the trustee will report to the court whether the case should be allowed.
If allowed, the trustee will gather and sell your non-exempt assets and use the
proceeds to pay the creditors in accordance with the provisions of the bankruptcy code.
Getting a Car loan after Bankruptcy:
Through Car Loan IQ, you may qualify for a car loan after bankruptcy but you
will need either proof that your chapter 7 bankruptcy is discharged or an "authorization
to incur debt" from the trustee of your chapter 13 bankruptcy if it is still
open. Again, bankruptcy auto loans are very popular with niche auto finance
companies and many of Car Loan IQ’s lenders and car dealers can help you get
back on the road again.
Important Disclaimer:
This information was created to inform and educate the public but in no way
should be considered legal opinions or legal advice. Car Loan IQ is not in
the business of providing legal advice.
