One of the main reasons that people in Texas often choose to avoid filing for bankruptcy even if it is their best logical decision to get out of debt is due to the fear that they will never again be able to regain credit and make necessary purchases. One such purchase is if they need to buy a new car. Understanding the different types of bankruptcy options such as Chapter 7 bankruptcy and Chapter 13 bankruptcy, as well as how it affects a person’s financial standing are important when moving forward after the moves to eliminate debt have been completed. This is key when seeking to make a relatively large purchase such as a car.
With Chapter 13, there will be a trustee who organizes a schedule of payment for either three or five years. With Chapter 7, the debtor’s assets are liquidated and distributed to the creditors. The trustee in Chapter 13 is in control of the debtor’s finances, so if the person would like to get a loan for a car, it must be approved by the trustee. With Chapter 7, the trustee is court-appointed and will attest to the value of the debtor’s property in a 341 meeting. After this is completed, the car loan application can take place.
Those who have filed for bankruptcy are advised to compare rates using online sources. Some lenders are friendlier to those who have had financial issues than others. There will, of course, be higher rates to the person seeking to purchase a car. Although that can lead to higher costs over the long term, those who need a vehicle and have their financial situation back in hand will also be able to get a car in spite of the bankruptcy. It must also be remembered that a person who has gone through bankruptcy will be unlikely to get financing on a vehicle that is extremely expensive. However, a more reasonably priced vehicle is doable.
Once the bankruptcy is further in the rear-view mirror, then it might be possible to consider a more expensive vehicle. In addition, when purchasing the car, it is likely that the initial purchase will require a bigger down payment considering the financial circumstances. Those who are seeking to get a fresh start and are also interested in purchasing a new vehicle after bankruptcy must be aware of all their options and how to move forward with the initial filing. For advice on all issues, speaking to a legal professional is the wise first step.
Source: carsdirect.com, “Getting Car Loans After Bankruptcy,” Justin Cupler, June 8, 2016