Bankruptcy is a big step that should never be undertaken lightly. Perhaps you have recently been through bankruptcy or are considering filing for bankruptcy. The type of bankruptcy protection that you filed for or will file for will make a big difference in the speed with which you will be able to rebuild your credit file and qualify for loans, such as those needed to purchase a car, truck, or SUV.
Chapter 7 Or Chapter 13? It Matters When Considering A Bankruptcy Car Loan
While every bankruptcy is unique, most bankruptcies fall under two categories - Chapter 7 or Chapter 13. Under a Chapter 7 bankruptcy proceeding, your property is sold and the proceeds of your property are divided among the creditors or lenders that you chose to include in your bankruptcy (other than student loans or other government obligations that you owe).
Once your creditors have received their share of the proceeds from the property that is sold during Chapter 7 bankruptcy, your creditors can no longer collect on the debt that you owe them. This debt is referred to as discharged debt. Chapter 13 bankruptcy allows a borrower to restructure their debts by working with a trustee who forms a payment plan that is paid over a period of five years.
Whether or not you will qualify for a bankruptcy auto loan will depend upon which chapter of bankruptcy that you filed. Those who have filed Chapter 7 bankruptcies should have no trouble qualifying for this type of loan; those who have filed Chapter 13 bankruptcies, on the other hand, will have to meet with their trustee and be approved to take out a loan according to the budget and the repayment plan that has been set up through the court for their debts.
Put Yourself Behind The Wheel With A Bankruptcy Car Loan
If you have had your debts discharged under a Chapter 7 bankruptcy proceeding, you are in good shape to apply for and be approved for a bankruptcy car loan. You have a new appeal to certain lenders because you are now debt-free, regardless of how you got there. Lenders know that you cannot file another bankruptcy proceeding for a specific number of years, and this makes them more willing to trust that you will honor the terms of your bankruptcy car loan.
The basic requirement to receive a bankruptcy car loan for those borrowers who are fresh out of Chapter 7 bankruptcy is that the borrower can demonstrate that they have an income that is adequate enough to meet the loan requirements and the monthly payment. It helps to improve your chances of getting the best terms on your bankruptcy car loan if you provide a down payment of some sort; even a small down payment such as $1,000 or $1,500 can reduce the rate of interest that you pay, saving you money over the course of your loan.
For borrowers who are restricted to the Chapter 13 bankruptcy guidelines in order to apply for credit of any kind, getting a bankruptcy car loan is still possible if they can demonstrate that they can make the monthly payments on the car.
