If you have filed for bankruptcy, you're not alone. Many people in the Seattle area have been hit by the economic recession and have had to file for either a chapter 7 or chapter 13 bankruptcy. Fortunately, you are now on your way back to a good financial position and are looking for way to get back on the road. The process of bankruptcy financing will vary depending on which type of filing you made.
Car Loans after Bankruptcy
One of the first things we as a subprime lender look at when you apply for a car loan after bankruptcy is to see whether you were discharged or dismissed from bankruptcy. If you were discharged, you have a high chance of an auto loan approval with bad credit because it shows a successful completion. A dismissed bk means that you did not complete the process per the court order and it could result in a rejected application.
When looking for a new car after bankruptcy, we suggest looking at a used vehicle. Pre-owned cars have many advantages over new cars, especially when your credit isn't in the best condition. Used automobiles tend to come with:
- A lower price tag
- A lower interest rate
- A lower insurance rate
All of these make it easier to keep up on your payments and not fall behind. Doug's Credit Center has a wide variety of low mileage and reliable second hand sedans, trucks, and SUVs to choose from, and with our guaranteed auto loan approvals, we make the process quick and simple.
When working with traditional lenders, such as banks and credit unions, bankruptcy car loan terms will reach only as far as 36 to 48 months and come with a high interest rate. Fortunately, subprime-friendly dealerships like DougsCreditCenter.com, offer longer loan terms and competitive interest rates resulting in an affordable monthly payment.
Open Bankruptcy Auto Loans
At Doug's Credit Center, we don't require you to be discharged from your bankruptcy before we will offer you a car loan. We can help you get an open bankruptcy auto loan in both chapter 7 and chapter 13 cases. Both chapters will require a little extra work from the debtor to obtain the correct documentation needed in this situation.
Chapter 7 – This is when a debtor can liquidate their assets to repay their creditors and their debt is wiped out. A chapter 7 case is generally discharged within four months from the date the consumer filed, which gives you and our finance managers a short window to work with. Before applying for a pre-approval, you must have your Meeting of Creditors – also called the 341 Meeting - completed with proof of the completion. All lenders require this meeting to be finish because it shows that you creditors have agreed to extinguish your debts with them, resulting in a lower debt to income ratio and higher line of credit availability.
Chapter 13 – Is when a debtor and judge set up a payment plan over a 3-5 year period to repay their creditors without their assets being liquidated. In some cases, you may elect to surrender your vehicle because it is a financial burden to you, and when this happens you will need to look for a new one. Before you can begin looking for car loan financing, there are a few steps to take.
- Compile a list of arguments as to why you need a new vehicle loan to present to your trustee.
- Talk with your trustee and discuss all available options within your chapter 13 bankruptcy.
- Obtain an Authorization to Incur Additional Debt letter from your judge.
- Apply online on this website for a pre-approval.
- Visit our Lynnwood, WA dealership, and drive away in your new-to-you vehicle the same day.
According to the new bankruptcy laws put into effect in 2005, no auto lender can work with an open chapter 13 case until the judge has signed off on an authorization. Taking on a new debt will require the judge and trustee to re-work your payment plan to fit in another expense, and doing so can result in a dismissal or other serious consequences.
Benefits of After Bankruptcy Vehicle Financing
You have successfully completed your bankruptcy which makes you essentially debt-free, taking on new debt can seem like a pretty scary idea. The reality is that a post-bankruptcy car loan is in fact one of the fastest ways to rebuilding your credit score after discharge.
There are two main categories that the credit bureaus use to calculate your credit score: revolving credit, like credit cards, and installment loans, such as an auto loan. The goal is to have at least one open account, and current, without maxing out the available credit balance. By financing a pre-owned vehicle from Doug's, you can easily meet those goals with an open installment loan that has a low balance and affordable monthly payments. Each payment you make will be reported to all three credit bureaus and help you to rebuild your credit fast.
Down Payments on Post Bankruptcy Car Loans
A large down payment can be the make-or-break point in a car loan approval following a bankruptcy. Lenders like to see that you are equally invested in the vehicle and willing to hold up your end of the deal, and a down payment is your investment.
Making an investment into the car is not just a benefit for the lender's sake, but also for your own. Putting money down on the car creates advantages you may not be thinking about long term. For instance, with a down payment you will experience:
- Lower total amount owed
- Lower interest rates
- Lower monthly payments
- Shorter loan terms
We understand times are tough and many people in Washington who have experienced financial difficultly may not qualify for car financing without a down payment offered. Luckily, there are ways to obtain your down payment:
- Asking a family member or friend
- Using a credit card
- Applying for a personal loan
If these options don't work, DougsCreditCenter.com's financial specialist will work with your situation to get you approved and driving away in your car.
Keeping Your Vehicle in Bankruptcy
The state of Washington allows all debtors filing bankruptcy the option to keep their vehicle through auto loan redemption, the cram-down process or by reaffirming your debt with the lender. There are stipulations to both procedures and your bankruptcy trustee or judge will ultimately make the final decision.
- Auto loan redemption is a process in chapter 7 in which the judge will order your lender to lower your current loan balance down to the fair market value (FMV) of the vehicle. This means you could owe $10,000 on the loan, but your car is only worth $7,000 so the lending entity must lower your loan balance to that amount and forego the $3,000 difference.
- Cram Down Process
- Cramming down your car loan in a chapter 13 bankruptcy is essentially the same as the auto redemption process with a few more stipulations. For instance, you are not eligible if you have not owned your car for 910 days (2.5 years) or more. This helps prevent you from purchasing a new car and filing for bankruptcy a few months later and getting the benefit of wiping away the car's depreciation.
- A reaffirmation agreement is a legally enforceable document stating you are promising to repay your current loan at the original terms, as if you have never filed for bankruptcy. In order to do this, you must first make an argument to the judge assigned to your case as to why you need to keep this vehicle and you must prove that you are financially able to keep making the monthly payments without creating a financial hardship on yourself.
Hassle Free Car Financing For Bankruptcy Clients
Filing for bankruptcy is nothing to be ashamed or embarrassed of because you have now given yourself a clean slate to start over with. Our bad credit auto sales makes it easy for you to start rebuilding your car credit with a bankruptcy auto loan from Doug's Credit Center. We can help you get into an affordable and reliable used car, truck, or SUV whether you have filed a chapter 7 or chapter 13 bankrutpcy, and even if you haven't yet been discharged. Our process is fast, simple, and secure. Apply online for your pre-approval, visit our Lynnwood dealership, and drive your new used car home.