Bad Credit Car Loans after Bankruptcy

If you're looking to qualify for bad credit car loans after bankruptcy with any type of finance company you find it's not very easy to do. There are a number of things that a lender is willing to put up with when offering vehicle loans to people with poor credit, and unfortunately bankruptcy is not always one of them.

That is not to say that once you file a claim that you will never be able to consider bad credit auto loans for another new or used car, but it will take time. A bankruptcy claim will affect your credit status for quite some time and most lenders will immediately see this as a red flag and second guest offering you a loan. So the question now is, what can you do to possibly make your chances of financing a vehicle following bankruptcy?

How to Handle Chapter 7 and 13 Bankruptcy

First thing you understand is that whether you filed for Chapter 7 or Chapter 13 bankruptcy your credit will still be negatively impacted the same way. However, there are some differences in how things need to be handled if you ever expect to get approved for auto financing ever again.

Chapter 7 Bankruptcy
For those who file for Chapter 7 bankruptcy they will be order to go through a liquidation process using the funds from their assets to repay previous lenders. However, it is possible to reaffirm or choose not to include certain property into your bankruptcy claim, and address the loan balance on your own.

This is a better option to take as subprime auto loans are increasing so most dealers will view this as a positive action when viewing your credit report. Taking this route also keeps your property from being repossessed and causing further credit damage.

Chapter 13 Bankruptcy
When filing for Chapter 13 bankruptcy a person is actually appointed a trustee that will help set-up a repayment schedule that usually is finished within three to five years. Also, unlike a Ch. 7 claim a person with this type of bankruptcy has the option "cram" a loan when shopping for a car.

In order for this to happen ones trustee must agree that their is enough financial leeway available to continue paying your current debt, and a new loan. However, dealers see this as a high risk type of loan, and would rather wait to consider you for auto financing with bad credit after bankruptcy has been settled.  

So if you do want to have a chance at financing a car with bad credit and after bankruptcy it's important to not cram a loan into a Chapter 13 claim, and to try and reaffirm Chapter 7 claims as well. This doesn't always guarantee you will have the credit score needed for loan approval, as a person still needs to meed the other requirements and be able to afford a loan. Yet, these simple things can offer the assistance on needs to qualify for an auto loan with bad credit.