Maryland residents who file Chapter 7 or Chapter 13 personal bankruptcies sometimes wonder how long they will have to wait before they are able to borrow money to buy a new or used vehicle. There is no straightforward answer to this question because every bankruptcy is different and lenders do not all evaluate auto loan and lease applications in the same way. However, most consumers who file bankruptcies are able to secure financing for a vehicle relatively quickly if they have money to put down and earn a regular paycheck.
Chapter 7 bankruptcies
An individual who files a Chapter 7 bankruptcy can apply for a car loan or any other kind of credit as soon as their case is discharged, and there are lenders and car dealers that specifically cater to people in this situation. However, these lenders and car dealers rarely offer attractive terms. A discharged bankruptcy may actually improve a consumer’s credit score, so better options could be available. If you have filed a Chapter 7 bankruptcy, you should check your credit score before you go car shopping. TransUnion, Equifax and Experian will all provide this information at no charge.
Chapter 13 bankruptcies
People who file Chapter 13 personal bankruptcies make monthly payments to their creditors for three or five years. During this time, they must obtain approval from a bankruptcy trustee before they take on any new debt. Bankruptcy trustees are usually reluctant to grant these requests, but exceptions may be made for loans that will be used to purchase a car that will provide transportation to and from work.
A fresh start
Bankruptcy offers people an escape from unmanageable financial situations and provides them with an opportunity to make a fresh start. Borrowing after a bankruptcy may be difficult, but it is not impossible. A full-time job and a sizeable down payment could convince a lender to look past a bankruptcy, and a Chapter 13 bankruptcy trustee could grant permission to take out a car loan if the vehicle being purchased provides essential transportation.