You’ve filed for bankruptcy. Now what? Can you buy a house? Do you still need to make child support payments? What about buying a car after bankruptcy? These are all important questions, and the answers can depend on the type of bankruptcy you’ve filed for, how long ago you filed, and many other factors.
Your bankruptcy lawyer on the Treasure Coast
As your local bankruptcy attorney on the Treasure Coast, the Law Office of Brent M. Myer, PLLC. is here to help you get answers to all of these questions and more.
In the past, we’ve covered topics like buying a house after bankruptcy, bankruptcy and child support, credit scores and bankruptcy, and many other related topics.
Today, we’re going to discuss what you need to know about buying a car after bankruptcy. Can you pay with cash? Do you need to take out an auto loan? Will your interest rates be sky high? These are some of the questions we’ll help you answer.
Buying a car after bankruptcy
In many cases, the answer to whether you can buy a car after you file for bankruptcy is YES!
It is typically easier to buy a car after bankruptcy than it would be to buy a house. But no matter what kind of big purchase you’re making, it must be thoughtfully considered to make sure you’re moving forward with your best interests in mind.
Often, you’ve freed up enough income due to discharged debts that you’re able to pay for a car in cash.
If you do this shortly after filing bankruptcy but you had that money (or were entitled to it) on or before you filed, you may be required to list that cash as an asset on your bankruptcy petition. In that case, it’s important to consult with a bankruptcy attorney immediately.
Financing a car after bankruptcy
Buying a car after bankruptcy with cash isn’t an option for many people.
Instead, they need to take out an auto loan and finance their vehicle. If you’ve filed for bankruptcy in the past and even if you have yet to be discharged of your debts, many lenders are still eager to offer you this option.
Taking out an auto loan can be an important step in getting a fresh start on your financial journey. It gives you the opportunity to start rebuilding your credit, provided you make payments on time.
Unfortunately, if you’ve filed for bankruptcy, you might be subjected to higher interest rates on your auto loan (nearly 30% in some cases). If you have a steady stream of income, a car dealership may be more likely to extend a fairer interest rate on an auto loan than a subprime lender who may look to take advantage of your credit history.
Before you take out an auto loan, be sure to shop around for the best terms and conditions so you’ll have the best chance of rebuilding your credit with your loan payments.
When to buy
Buying a car after bankruptcy can depend on whether you’ve filed Chapter 7 or Chapter 13 bankruptcy.
Filing for Chapter 7 bankruptcy can mean total forgiveness of unsecured debts (i.e., those not secured by underlying assets) in some cases. But, you need to meet certain income requirements to do so. Be sure to look at our handy guide to Chapter 7 Bankruptcy here. It includes a timeline and important steps to take during the process.
Chapter 13 Bankruptcy, on the other hand, is a repayment plan for a minimum of 3 years but no more than 5 years. This plan may result in unsecured creditors being paid in full or pennies on the dollar depending on your circumstances.
Factors like your assets and income impact how much must be paid to unsecured creditors. We also offer a roadmap for navigating Chapter 13 Bankruptcy on the Treasure Coast here.
In either case, it’s best to wait until your debts have been discharged and your bankruptcy case has been closed to move forward with buying a car after bankruptcy.
But how long will this take?
For Chapter 7 bankruptcy, you should get a Notice of Discharge from the bankruptcy clerk of court approximately two months after your 341 meeting of creditors.
Chapter 13 bankruptcy, on the other hand, can take much longer. If you are in a Chapter 13, the process is significantly different.
These cases involve a continuous proceeding that often takes between three and five years to complete. If you need a new car during that time, you need permission from the bankruptcy court before buying one. Typically, this requires filing a motion with the court, so it’s very important to consult with a bankruptcy attorney first.
Call the law office of brent m. myer, pllc
While you do have options for buying a car after bankruptcy, it’s generally best to wait as long as possible after your case is close to do so. This helps ensure you get the lowest interest rate if you require an auto loan.
Navigating the world after filing for bankruptcy can be challenging. There are several implications to doing so, but it is often the best choice for moving forward and getting a fresh start.
If you would like a free consultation to discuss some of your options when it comes to buying a car after bankruptcy and more? Contact us today. Call (772) 873-7794 to schedule a free telephone consultation.