What Bankruptcy Means for Your Auto Loans

Even if you are in the process of filing for bankruptcy, plan to file, or have previously discharged bankruptcy, it is possible to take out an auto loan. Although it isn’t easy, it is still possible depending on your specific situation. There are two kinds of bankruptcy, which are crucial in answering whether or not you can take out an auto loan.

The first type of bankruptcy is called Chapter 7. In this case, any secured assets of yours would have been repossessed by the creditor in order to pay toward your outstanding debts. In addition, any bank accounts and other property you may own would be sold. If you were to have an existing car loan, you could potentially ask to exclude that from your bankruptcy, so long as you continue to make payments.

The second form of bankruptcy is Chapter 13. In a Chapter 13 situation, you would be designated to a trustee. This trustee would be in charge of managing a schedule of your payments and holding you accountable for making those payments. If you decide you want to take out an auto loan while under these circumstances, you would have to file a petition with your trustee to get permission to do so.

In addition to the information provided above, if you are looking into an auto loan while filing for bankruptcy, you will still have to go through the work of finding a lender. This can be very difficult, as creditors are reluctant to lend to individuals who are currently or who have previously been in these situations. Although difficult, it is not impossible to find a creditor during bankruptcy. There are lenders who specialize in lending in poor financial situations and are willing to work with you.

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