Know your options
Can I Buy a Used Car After Declaring Bankruptcy?
by Dollar Stretcher Contributors
Buying a Cheap, Reliable Used Car
Adjusting a Chapter 13 Bankruptcy Repayment Plan
Can I Buy a Used Car After Declaring Bankruptcy?
We got in debt trouble and declared bankruptcy late last year. Now our old minivan is dying. Is there any way that we can qualify for an auto loan? We don't want anything fancy or new. We just want a used minivan that can haul the kids to school and take us to the grocery store. Is there any way to buy a used car after bankruptcy?
Speak with Your Bankruptcy Attorney
I spoke to my step daughter, who is a paralegal in a law office that practices bankruptcy law exclusively. You need to speak to your bankruptcy attorney because there are different types of bankruptcy and the lawyer would be the best one to give them advice about the car loan.
Bruce from TN
It May Not Be Difficult
You didn't state which bankruptcy you filed under. If you filed under Chapter 13, before you even start looking for a used mini-van, take a look at your bankruptcy papers that you received. In those papers, you will find what the limit is that you can finance. Under federal bankruptcy rules for Chapter 13 the limit is $7500.
It may not be as difficult as you think because a lot of dealers figure that if you filed bankruptcy, you don't have too many bills. Of course, your credit score probably has not improved much depending on how long ago you filed and which bankruptcy you filed under. You will just have to look around and see which dealers will work with you. Try going online and looking up dealers in your area that work with people that have filed a bankruptcy.
You Will Pay More in Interest
You can find someone who will give you a loan if you search diligently. The interest rate will be considerably higher than for those with high credit ratings. The amount of time that has passed since the bankruptcy makes a difference. Your chances are better for a decent deal after three years have gone by with no new bad reports. I bought a used truck and then traded it in on a minivan about three years after my bankruptcy. A dealer will usually work hard to find financing for you. Stick with a reputable dealer and avoid "rinky-dink" operations if you can.
Talk to Local Dealers
A number of years ago we had the same issue. We found a local used car dealer that was able to loan us enough for a used car. We paid it off sooner than we originally stated and got some of the price knocked off! We did have something to put down on it, which also helped. I would look at and talk to the local dealers first. They were able to help several of my kids get back on their feet with a better vehicle as well.
Now we can go to the local bank where the dealer is and they will look at our application and try to help us.
Been There, Done That
Having been down that road myself, I suggest going to a buy here/pay here type dealership. You get a decent vehicle and you can rebuild your credit. It's also a shorter time commitment at typically two years.
There Are Dealerships That Will Work With You
I was in the same situation. My car was on the fritz and I had just gone through bankruptcy a year prior. I went to a local dealership. I had graduated with the salesman. He told me they could do nothing for me. I walked out disappointed, wondering what I would do if my car died.
I remembered that in the mail, I had received flyers from dealerships that help people to get a car after bankruptcy. I called one and told the representative what I was looking to get. She called me the next day stating a vehicle that met my needs just arrived. I went and looked at it and she processed a loan for me. Find out if you have any local dealerships that will work with people in bankruptcy. You will pay higher interest rates, but it will help you to get a car and build your credit.
Be Smart About Borrowing
I don't think you should have a problem getting credit to buy a car. We had to file bankruptcy back in the 80s during the farm crisis. Shortly after our bankruptcy was confirmed, we were flooded with applications for new credit cards and other loan applications. Since our debt was wiped out in the bankruptcy, they were ready to lend us all kinds of money. You have to be smart though and don't borrow more than you actually need. Go to a dealer you like, pick out a vehicle, and then see what kind of financing they can do for you.
Considering buying a car? Compare vehicle quotes and lock in the lowest price!
Set Sight Lower and Pay Cash
If I just went through bankruptcy, I would save up while my van was still running and pay cash for my next vehicle. Set your sights lower and you can get a decent running car cheap. My 1999 Acura just broke down, and the repairs were more than it was worth. I bought a good running 1997 Accord for $1800. The Accord needed two new tires. I was able to take nearly new tires off my Acura and put them right on my Accord. See if you can extend the life of your van by putting a little money into it and save everything you can to pay cash for your next car. If you look for something similar to what you are currently driving, you might have some little things your next car needs.
Yes, You Can!
Yes, you can definitely buy a car after bankruptcy. We purchased a newer vehicle than we ever had before because the loan companies know you cannot file bankruptcy again for a set number of years. Also, they know you should be able to make the payments since you do not have a lot of outstanding debt. You may pay a bit higher interest rate, but the ability to purchase a car is worth the increased rate.
Carole in Oklahoma City, OK
Take the Next Step:
- An insurance friendly car can help you save significantly on your auto insurance premiums. Consider these tips on buying an insurance-friendly car.
- Make sure you are not overpaying for auto insurance. See how much you could save with just a few clicks. Fast, free quotes and online comparisons.
- Get more advice on life after bankruptcy by visiting the Dollar Stretcher Library.
Have an idea that we didn't include? Send it to us and we'll add it to the article.
More Debt Tips & Tools
- 6 smart strategies for paying off your credit cards
- 5 great second jobs to bring in extra cash
- Pay down debt now or save: Here's how to choose
- Can I get a debt consolidation loan with bad credit?
- Staying motivated to continue digging yourself out of debt
- Options when you can't make your car payments
- 8 ways to beat retail therapy
- This week's Readers' Tips
- Reduce your debt step by step
- Am I a good candidate for credit counseling?
- Do I have a debt problem?
- Compare personal loan rates
- Get free answers to financial questions
- Get free answers to legal questions
- Calculate the real cost of your debt
- Debt pay-down calculator
- Calculate the true cost of paying just the minimum