Bankruptcy

If you’ve recently filed for bankruptcy, you might think it’s impossible to apply for auto financing. It’s true that a lower credit score can limit your options. But we’re here to help. No matter what you’re dealing with, our finance department can sort you out.
At Lake Powell Ford, we’re experienced with bankruptcy cases. We have financial packages available to accommodate credit levels of all types! In spite of your unique credit situation, we can help you drive home in a new car. More than that, taking out one of our loans can help you get your credit record back on track. We’re committed to giving you the help you need.

Bankruptcy and Auto Loans

Bankruptcy auto loans are specially designed for those who have been discharged from Chapter 7 or Chapter 13 bankruptcy. Better still, the process to apply for one of these loans is simple.

However, even those applying for bankruptcy auto loans must meet certain criteria, depending on the lender. For example, you’ll need to prove your income, employment, and residency. But there are also a few things you must do before initiating the loan process.

Check Your Credit Score : Obtain a copy of your credit report and make sure that your bankruptcy discharge appears there. While you’re at it, make sure the rest of your credit report is accurate. Removing inaccurate information from your report may help improve your credit score.

Figure Out How Much You Need to Borrow : As a bankruptcy candidate, you’re more likely to be approved for a smaller loan. Shop around for a reliable, cost-effective vehicle that will help you reduce overall costs.Knowing how much you need to borrow is also helpful during the application process and will ensure you get the money you need for the car you want.

Save for a Down Payment : When you pay a down payment, you show your lender that you’re reliable. Plus, a bigger down payment means you can borrow less money and pay less interest overall. A subprime lender may ask for $1,000 down or 10 percent of a vehicle’s asking price, whichever figure is lower.

Find a Cosigner : Depending on the lender, you may need a cosigner. If you fail to make timely payments, your cosigner will be on the hook for what you owe. Therefore, it’s important to make sure your cosigner understands the terms of your loan!

Gather Your Documents :Arrive at the dealership with proof of your bankruptcy discharge. If your bankruptcy ended in dismissal or your discharge hasn’t yet been reported to the credit bureau, you won’t be able to apply for a bankruptcy auto loan. If you’re still in the process of filing for bankruptcy, you may need to follow a different path to obtain financing (see below).

Chapter 7 Bankruptcy

In a Chapter 7 bankruptcy proceeding, your nonexempt assets will be sold to pay your debt. This process typically takes from three to six months, though the bankruptcy will continue to show on your credit report for up to 10 years.

Before you apply for a car loan, you should wait until your bankruptcy procedure is over. You don’t want your new car to become part of your bankruptcy proceedings! When your bankruptcy appears on your credit report as discharged, it’s time to get your car loan.

Chapter 13 Bankruptcy

In a Chapter 13 bankruptcy proceeding, you’re allowed to repay your debts in installments. You’re also allowed to retain your assets. Your installment plan may last anywhere from three to five years. However, a Chapter 13 discharge will appear on your credit report for up to seven years. With a Chapter 13 bankruptcy, you can obtain a car loan during your bankruptcy proceeding or after it’s been discharged.

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Get an Auto Loan During Your Chapter 13 Proceedings

Because Chapter 13 proceeding can last years, lenders make bankruptcy auto loans available to you during this time. However, there’s a process you must follow before you can apply.

• Obtain a Sample Buyer’s Order from the Dealership:

  Tell the dealership finance department that you want to apply for a bankruptcy loan during your proceedings. They’ll provide you with a sample buyer’s order to show the court. The order will provide the details of your loan, including the estimated interest rate and loan amount. The dealership also must include the highest possible interest late for your loan.
  The buyer’s order will also include a description of the car you want to finance — including make, model, and model year — along with a caveat, “or similar.” Should the vehicle you wish to purchase become unavailable, the court may invalidate your motion, and you’ll need to begin the process over again.

• Alert Your Trustee:

  You’ll also need to show the sample buyer’s order to your trustee and discuss why you need a new car. The trustee will evaluate the order, weigh its impact on your bankruptcy installment plan, and decide whether or not you’re allowed to move forward.

• Motion to Incur Additional Debt:

  If your trustee approves your loan, they’ll file a Motion to Incur Additional Debt. Your creditors will review this motion. They’ll be given the opportunity to object at a hearing you may need to attend.

• Order to Incur Additional Debt:

  If approved by the court, the Motion to Incur Additional Debt becomes a court order. The court may also add their own stipulations, putting a cap on your interest rate, monthly payment, or total loan amount.

• Finalizing Your Loan:

  Once you have a court order, you can head back to the dealership and sign on the dotted lines. Your dealership’s finance department will help you finalize your loan and you’ll be ready to drive home in your new car

Get an Auto Loan after a Chapter 13 Discharge

Once your Chapter 13 bankruptcy is discharged, you’re in the clear to apply for a bankruptcy auto loan. Simply head to the dealership, and our finance team will help you assemble the best financial package for your needs.

Bankruptcy and Your Existing Car Loans

If you file for bankruptcy with an existing car loan, you have options. For starters, you can surrender the vehicle and forgo paying the remaining loan balance simply by including the vehicle in your bankruptcy filing. To keep the vehicle, you can attempt to go through the redemption, reaffirmation, or cramdown process.
Anyone going through the bankruptcy process with an existing car loan would be wise to seek legal counsel and consider each of these options carefully!

Redemption

You can redeem your existing car loan by paying its fair market value to your lender in one lump sum. The lender must approve this process. If you have the cash, this is a great option for anyone whose car is worth less than their loan balance.

Reaffirmation

When you choose reaffirmation, you can renegotiate the terms of your loan with your lender. They’ll allow you to make timely payments and you can rest easy that your car won’t be repossessed.

Cramdown

If you purchased your vehicle 910 days (about two and a half years) before filing for Chapter 13 bankruptcy, you may qualify for a loan cramdown. This process reduces your outstanding loan balance to the current market value of the vehicle. If you have negative equity on your loan, replacing it with a cramdown loan may offer some relief.