What To Expect Buying A Car After Bankruptcy

Deciding to file for bankruptcy is a decision that can have long-lasting consequences. A bankruptcy will stay on your record for 10 years and can affect your ability to get future credit. Following is what to expect buying a car after bankruptcy.

Bankruptcy was designed to give people deep in debt a second chance. It is a chance to start fresh without burdensome payments. Immediately after filing for bankruptcy, it will be extremely difficult to get a credit card, qualify for a mortgage or finance a new car. It will be difficult, but it is still possible.

Time Heals All Wounds

It did not take you a week, a month or even a year to get yourself into the financial mess that forced you into filing for bankruptcy. Likewise, rebuilding your credit after a bankruptcy will take time. As long as you understand that you must be more responsible with any future credit you may receive, you can start taking steps to rebuild your credit.

Before you attempt to get a mortgage or get a car loan after bankruptcy, it would be smart to try to reestablish your credit by taking small steps. You should make sure you pay all of your bills on time. You can apply for a collateralized loan or a small personal loan and repay it quickly. You might even be able to obtain a secured credit card. After some time has passed, you may start to get offers for new credit cards. In a few years, assuming you have been acting responsibly, you should be able to qualify for a mortgage or a car loan.

Purchasing a Car after Bankruptcy

How long after bankruptcy can you buy a car? The answer varies depending upon a number of factors. If you want to buy a brand new car you may be turned down by several Dealers before they will find one that can get you financed. You may have to come up with a large down payment and you may have to settle for a less expensive car.

If you have cash, you can buy a car immediately after your bankruptcy has been discharged. The only caveat here is if you buy a $100,000 Mercedes for cash, the Bankruptcy Judge may find out and accuse you of lying about your assets when you filed your bankruptcy petition. That is a very unlikely scenario, but it is within the realm of possibility.

Getting an Auto Loan after Bankruptcy

There are lenders that will grant automobile loans to people that have filed bankruptcy. The process must be complete and your bankruptcy discharged before a bank will consider such a loan. The interest rate may be astronomical and you might wind up paying several hundred dollars more per month than someone with excellent credit.

If you cannot get financing at a new car dealership, there are plenty of used car lots that advertise as “Buy Here, Finance Here” that have their own financing department. They sell cars, usually at inflated prices and finance at high interest rates. Bankruptcy does relieve you of your unsecured debts, but it also comes at a cost.