Having a bankruptcy discharged, whether it’s a Chapter 7 or Chapter 13, can be a relief. Your debts are paid off, your creditors have been satisfied, and you can start fresh in the world of credit. Although a bankruptcy stays on your credit reports for up to seven or 10 years, depending on which one you filed, its impact lessens over time and you can still qualify for an auto loan after bankruptcy.

How to Get a Car Loan after Bankruptcy

The best time to get a car loan when dealing with bankruptcy is after it’s been discharged. If you can, you should wait for some time to pass after that so you can improve your credit score.

If you can’t wait and you need a vehicle now, you need to take some steps in preparation for applying for your first post-bankruptcy auto loan:

  1. Buying a Car after BankruptcyCheck your credit – Know what’s on your credit reports and where your credit score currently stands. Also, make sure the bankruptcy is listed as discharged. If it's not, have a copy of the discharge papers ready for the lender to check just in case.
  2. Research cars – Look up prices, safety ratings, and reviews on vehicles you’re considering. Make sure to think about how much driving you're going to be doing, and the features you absolutely must have.
  3. Budget and save – Have a budget in mind and stick to it. Make sure you consider the overall cost of the loan, not just the car's selling price. You need to budget for a down payment, insurance, fuel, and maintenance expenses too.
  4. Rate shop – Try to get pre-approved with your current bank or credit union to see what they can offer you. Also, you can try to apply with other online lenders to rate shop and compare deals. If you can't get approved, Drivers Lane can help you find a dealership near you that works with bad credit.
  5. Consider a cosigner – Although not required lenders except in unique situations, having a cosigner could increase your approval odds and even help lower the overall cost of the loan by helping you qualify for a better interest rate.

Is it Possible to Buy a Car during Bankruptcy?

While we keep saying you should wait until your bankruptcy is discharged, sometimes this just isn’t possible, especially if you need a car with an open Chapter 13. Chapter 13 bankruptcies take three or five years to complete, and a lot can happen during this time.

The good news is that subprime lenders – those that deal with unique credit challenges – realize it takes a while to complete a Chapter 13, and many are willing to work with borrowers with an open Chapter 13. You first need to get the court’s approval, and then you can go through the auto financing process.

If you’re dealing with an open Chapter 7 bankruptcy, however, lenders typically won’t work with you until it’s discharged. Chapter 7 bankruptcies typically only last a few months, and because your assets can be liquidated (sold) to pay back your creditors, subprime lenders don’t want to run the risk of a new vehicle being included in the liquidation process.

It may sting for a few months without a car, but it’s not worth the trouble of trying to get approved during an open Chapter 7 – wait until it’s discharged.

Getting Started Today

You should wait until your bankruptcy has been discharged to buy a vehicle. Although there are situations where it’s possible to get an auto loan during an open bankruptcy, the process is easier and quicker if you wait.

If you recently had a bankruptcy discharged, or are dealing with an open Chapter 13, and need a car, we want to help. Drivers Lane can help you find a dealer near you that can work with challenging credit situations.

Just fill out our fast and secure auto loan request form today, and you could be on your way to a new vehicle and a new beginning.