Yes, You Can Get a Car Loan After Bankruptcy

Many people worry that filing for bankruptcy will ruin their chances of ever getting credit again, but that’s simply not the case. Whether you’re looking to finance a car, buy a house, or get a credit card, there are options available to you after bankruptcy.

Timing is key, however, and it’s important to understand that financing immediately after bankruptcy can come with higher interest rates. But don’t let that stop you—getting a car loan post-bankruptcy is not only possible, but it’s also a great opportunity to start rebuilding your credit.

Can I Get Approved for a Car Loan After Filing Bankruptcy?

Filing for bankruptcy might seem like the end of your credit journey, but it’s actually a step toward improving your financial situation and securing future loans. Here’s what you should know about car loans after bankruptcy:

  • Car Loans Are Still Possible: Yes, you can get a car loan after filing for bankruptcy. Many lenders work with individuals who have filed for bankruptcy and are willing to offer car loans, although there are some things to keep in mind.
  • Expect Higher Interest Rates: Since you’re considered a higher-risk borrower after bankruptcy, car loans will likely come with higher interest rates for the first few years. The good news is that this won’t be forever.
  • You May Need a Larger Down Payment: Some lenders may require a down payment to approve your loan. This can help lower your loan amount and show that you’re serious about managing your finances responsibly.

Car Loans After Chapter 7 Bankruptcy

Chapter 7 bankruptcy is typically completed in four – six months, though it may take longer if there are tax refunds or non-exempt property involved. Here’s what you need to know about car loans after filing Chapter 7:

  • Loan Approval Timeline: Most lenders will approve your car loan once your bankruptcy discharge is filed, which typically happens about 90 days after your case begins. Even if your bankruptcy case isn’t closed yet, lenders can still offer loans, though the discharge is the key document that lenders are looking for.
  • Higher Interest Rates: After bankruptcy, you’re likely to face higher interest rates, especially right after your discharge. However, if you’ve been making timely payments on any other credit accounts and your finances are stable, the terms may improve over time.
  • Consider Refinancing: After a couple of years, when your credit score has improved, you might be able to refinance your car loan to get a lower interest rate. Just make sure the loan you sign doesn’t come with an early pay-off penalty.

Car Loans After Chapter 13 Bankruptcy

Chapter 13 bankruptcy lasts anywhere from 3 to 5 years, and during this time, you’ll make payments through a repayment plan approved by the court. Here’s how car loans work in this scenario:

  • Court Approval Needed for New Debt: While your Chapter 13 bankruptcy is open, you generally cannot incur new debt (including car loans) without the court’s permission. If you need to get a car loan during your Chapter 13 case, you will need to work with your bankruptcy attorney to request permission from the court.
  • Post-Chapter 13 Car Loans: After your Chapter 13 case is completed and your debts have been discharged, you can apply for a car loan as you would after Chapter 7. While you may still face higher interest rates, you’ll be able to begin rebuilding your credit.

Tips for Getting Approved for a Car Loan After Bankruptcy

If you’re ready to apply for a car loan after bankruptcy, here are some helpful tips to improve your chances of approval:

  • Rebuild Your Credit First: Start rebuilding your credit after bankruptcy by paying all of your bills on time and avoiding excessive debt.
  • Save for a Down Payment: A down payment can reduce the amount you need to borrow and show lenders that you’re financially responsible.
  • Look for Lenders That Specialize in Post-Bankruptcy Loans: Some lenders specialize in offering loans to individuals who have filed for bankruptcy. These lenders may be more willing to work with you and offer better terms. Do not shy away from the large dealerships though when checking out your options.
  • Avoid Applying for Too Much Credit: Apply for only one loan at a time to avoid damaging your credit score with too many inquiries.

Next Steps: Rebuilding Your Financial Future

It’s possible to get a car loan after bankruptcy, but it’s important to be strategic. Rebuilding your credit, making timely payments, and managing your finances carefully will increase your chances of getting approved for better terms in the future.

Ready to Take the Next Step?

  • Consult with a bankruptcy attorney to explore your options and discuss your financial situation in detail.

We’re here to help you take the next step toward financial freedom.