Budgeting Spending Less Than You Earn And Saving
While many people resort to filing Chapter 7 bankruptcy from the unexpected loss of a job or a medical emergency and its huge bills, there are just as many people who got into trouble by routinely overspending and not managing their finances well. For the latter group of bankruptcy filers, now is the time to do better, establish better habits, and keep a closer eye on your financial health moving forward. This is probably the most important of all the bankruptcy recovery steps you take. The big picture aspects of this step are spending less than you earn, making a realistic budget and sticking to it, and beginning to save money ahead of the next unexpected happening in life so youll have a cushion to fall back on when needed.
You can get help with this from a certified, reputable credit counseling service. Note that this kind of service is not the same as for-profit operations such as credit repair companies or debt settlement companies. In order to understand the differences and to find a good credit counselor, check out this article from The Balance. You can also visit the Financial Counseling Association of America or the National Foundation for Credit Counseling. And be very careful before spending any money on a credit repair service that makes it sound like they can easily fix your credit problems. Learn more in our previous article, Do Credit Repair Services Work?
Getting A Car During Or After Chapter 13
Chapter 13 bankruptcy is different because, unlike Chapter 7, its a 3- to 5-year process designed to let debtors get caught on their loans. While youre in Chapter 13, you must get permission from the bankruptcy court to buy a car. Its a good idea to check with your bankruptcy attorney before doing so.
Once your bankruptcy is discharged, you can buy a car without anyones permission. The same suggestion applies: The longer you put off such a purchase, the likelier it will be that your interest rate will be less punitive.
Is The Process Straightforward
There is a process that a prospective borrower must go through to get approval for the loan, but if you need a vehicle to get to work, then no one will stop you from getting a new one.
The loan approval process is designed to make sure that the borrower has an affordable monthly car or truck payment which doesnt cause them to miss the Chapter 13 Bankruptcy payments and have their case dismissed.
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How Car Buying In Bankruptcy Can Help Your Financial Status
It is not the act of simply buying a car that benefits you while in bankruptcy. What helps is that you replace your current car with a more affordable model, and start rebuilding your credit. Choosing to replace your car while in a bankruptcy case is a great way to begin re-establishing your credit and improving your financial situation. Unlike re-affirmation or redemption, which do nothing to improve your credit rating, replacing your current car can help your credit. Replacing your auto while in bankruptcy can have the following benefits:
- Help you get a car with better gas mileage, which saves you money
- Boosts your credit score almost immediately
- Establishes a positive credit profile on all 3 major credit reports
- Eliminates negative equity in your current vehicle
Buying A Car After Bankruptcy
Once you receive your bankruptcy discharge, you can begin rebuilding your credit by taking on new loans and improving your financial situation.
However, at this point, it may be more difficult to buy a car, especially if you want to take out an auto loan. A Chapter 7 Bankruptcy will have an immediate negative effect on your once the discharge is finalized. This means that you may only qualify for a high interest rate on your new car. This type of car loan, known as a bad credit auto loan could put you back where you were before the bankruptcy if you arent careful.
If you do need to purchase a car soon after your discharge, consider buying a secondhand car. Not only will a used vehicle be cheaper than a new vehicle, you may get a significantly better rate on the vehicle.
Depending on the cost of the vehicle, you may be able to buy it outright with money you keep as part of your Chapter 7 exemptions. You may decide to seek help from friends or family to get the funds, rather than taking on a new loan at an exorbitant rate.
When shopping for a new car, you should also shop around for loan rates. Often, local are able to provide significantly lower rates than other financial institutions. This is partially because credit unions, unlike car dealerships or other lenders, are not-for-profit institutions. By working with a credit union, you may be able to save a few hundred dollars through the duration of your car loan.
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Select The Right Time
If you are filing for Chapter 7 bankruptcy, make sure that you have finished the initial 341 meeting where a trustee examines all of your debts and assets. Most lenders will not even consider you for a loan during bankruptcyuntil this meeting has been completed. If you are involved in a Chapter 13 proceeding, you should wait until the trustee has set up your initial budget of debt repayment.
When You Need To Finance A Car In Spite Of Bankruptcy
Day One Credit helps people find a bankruptcy car loan, which is often the best way to finance a car purchase when you have an active or recently discharged bankruptcy on your credit report. You can fill out our quick online application that we will then share with our strong network of top lenders who are willing to work with bankruptcy customers. We go the extra mile to help anyone find a bankruptcy car loan if they meet our basic eligibility criteria. The bankruptcy car loans we find for you often require little or no money down at all. A bankruptcy care loan may also be an effective way to begin rebuilding your credit during and after bankruptcy when many lenders wont give you the time of day. If you have questions about how all this works, please visit our Common Questions page to see if your answers are there, but also feel free to give us a call at 855-475-4725. Were here to help you understand your options for getting the car you need!
A question people often have is what happens if they need to file bankruptcy more than once? Many people just assume declaring bankruptcy is a once-in-a-lifetime last resort action they can take only once. In reality, there is no legal limit to how many times you can file bankruptcy. There are, however, very strict rules Continue readingHow Many Times Can Bankruptcy be Declared?
Borrowing money from friends and family.
Stopping payments to some creditors while keeping up others.
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Finding A Bankruptcy Car Loan Through Day One Credit
At Day One Credit, we make it as easy as possible to help you find a bankruptcy car loan when you need one, whether its whether your bankruptcy is open or recently discharged. Heres how it works:
Get Educated: Check first with your bankruptcy attorney in order to determine whether or not a bankruptcy car loan is a good idea. If it is, well be happy to help!
Apply: All you have to do is fill out our quick online application, which will take you less than five minutes. Well review your information and contact you if we need to clarify anything. Then we send your application out to our full network lenders. When their offers come in, we select the one with the best terms to present to you.
Find Your Ride: Once you find your bankruptcy car loan, then youre free to check out our selection of late-model used cars with low miles and in great condition to find your next ride!
Day One Credit works exclusively with bankruptcy customers, and our team has years of experience helping people find financing for a car purchase in spite of an open or recently discharged bankruptcy. Got questions? Were always happy to help you understand your options. Check out our Common Questions page, or give us a call at 855-475-4725!
Provide Information To Duncan Law
After you have the necessary paperwork from the finance company you should immediately email or fax that to your attorney at Duncan Law.
Additionally, you will need to provide a written statement to our office, explaining why you need the new vehicle. If you need the vehicle within a certain period of time then let us know that as well. The whole process usually takes about a month so if you are completely without transportation then let us know and we can possibly do an expedited hearing to get in front of the bankruptcy judge sooner.
Also, if you are looking to release or get rid of a vehicle that currently has a loan on it then let us know that as well. We need to know the type of vehicle, the VIN #, the company who is financing that vehicle and how much is currently owed on the vehicle.
We also need the last 60 days of pay stubs or income statements for all sources of income in the household.
Finally, we need you to complete a new budget showing your income and expenses for bankruptcy.
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Why Should You Be Able To Buy A Car During Chapter 13 Bankruptcy
Chapter 13 Bankruptcy typically lasts between 3 and 5 years, which is long enough for a car to become unreliable.
One of the understandable fears about filing for Chapter 13 Bankruptcy is that your car might break down, and you cant get to work.
But because you are still in an active bankruptcy, no car loan company will be willing to work with you for a new loan.
How would you get to work and make the money necessary to pay off the Chapter 13 without a car or truck?
Luckily the Minnesota Chapter 13 Bankruptcy Trustees and many car loan companies recognize that people might need to replace their vehicles over the life of the Chapter 13 Bankruptcy, and so people can buy a new car during Chapter 13 Bankruptcy.
Have Your Trustee File A Motion To Incur Debt
Your trustee files a Motion to Incur Additional Debt with the bankruptcy court. The motion is sent to your creditors as well, and theyre allowed to object for any reason. In some cases, you also need to attend a hearing.
The court either denies or approves the motion. If they approve it, youre given an Order to Incur Additional Debt, which you can bring back to the dealership. The court can also can make specific requests about your auto loan contract, including setting a maximum interest rate or loan amount.
If the court turned down the motion, then you have to start from square one, and may want to consider waiting until your bankruptcy has been discharged.
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What Happens If I Miss A Car Payment During Chapter 13
What happens if you miss a car payment during Chapter 13? The lender could ask the bankruptcy court for permission to proceed with a repossession! Dont worry though, that doesnt happen immediately. We can normally fix this for you. Were going to talk through the process when you miss a car payment so you can get back on track before its too late.
You Can Prove That Your Car Expenses Are Reasonable
In a Chapter 13 bankruptcy, your repayment plan must show that all of your disposable incomethat’s your income minus your necessary living expensesis used to repay your unsecured debts under your repayment plan. In determining your disposable income, you may deduct only those expenses that are reasonably necessary for the support of you and your dependents.
Because your creditors want to be paid as much as possible, they’ll object if it appears that you’re using funds in an unreasonable mannerfor instance, to make an excessively high car payment or to pay for a second car you don’t needinstead of paying the funds to creditors as part of your disposable income.
It isn’t uncommon for a court to decide that an exceptionally large car payment on an expensive luxury car isn’t a reasonable expense, or that you only need one car to go to work. In both cases, you might not be allowed to use the car payment objected to when computing your disposable income. Instead, you’d only be able to claim an expense that would be consistent with one lower priced car.
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What Do I Do If I Know Im Going To Miss A Car Payment During Chapter 13
Contact your lawyer immediately. In most cases, your lawyer will not be notified when you miss a car payment during a Chapter 13. If you dont call, your lawyer would have no way of knowing youre having an issue. Many times people wait until the Motion for Relief is filed. This can be a problem because the further you get into your issue, the harder it is to fix.
If you are able to catch up on your payments, you should. If you cannot, be honest with your lawyer. Many times our clients tell us they can catch up when they cannot. We need to know these things. If you cant catch up on the payments, we may have other solutions, but I need to know that.
How Do I Start Applying For A Car Loan While In Chapter 13
That is a good question for your Minnesota bankruptcy lawyer.
An experienced Minnesota bankruptcy firm with good customer service will know exactly how to get you on the right track.
Over the last 40 years, I have helped many clients replace unreliable or ageing cars so that they can:
- Get to work
- Discharge the debts they cant afford
- Finish their Chapter 13 Bankruptcy
- Get a financial fresh start
- Sleep soundly again
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Necessary Purchases Should Be Fine
If you need to purchase a car out of necessity, the court or the trustee will generally not prohibit you from buying it. They understand that people need a car to get to work and they want your bankruptcy to succeed. They just want to make sure you did not lease that dream BMW but bought a reasonable car instead. They should approve the sale of a house or refinance if there is a specific reason like a hardship or an anticipated interest adjustment that will cause you to default on your payments anyway.
Why Visit Matthews Motors Goldsboro
Here at Matthews Motors we have been helping people in bankruptcy buy cars and rebuild their credit for over 10 years. We have countless success stories about customers who have begun to rebuild their finances through buying a car while in bankruptcy. After time, they built their credit using that car loan, and were able to rebuild the rest of their finances on that foundation. We are known as the “Walking Man’s Friend” because we are passionate about helping people find a great deal on a car. This includes people in all different financial situations, including chapter 7 and chapter 13 bankruptcy.
In addition to our decade of experience, we also have the tools and processes in place to help you buy a car in chapter 13 bankruptcy or chapter 7 bankruptcy. We work with several different banks who specialize in bankruptcy financing for chapter 7 and chapter 13 cases. These relationships allow us to ensure that we can find the right financing for everyone. We also work with bankruptcy attorneys in multiple states to stay up to date with the latest changes to bankruptcy law. We know how the bankruptcy process works, and that buying a car can be an important part of that process. Plus, with our incredible inventory of used cars in Goldsboro, we can find a car that you like, and that works with your specific financial plan.
**Remember** Replacement must be done before your discharge!
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Order To Incur Debt In Chapter 13
Your bankruptcy trustee then files the motion with the court, which in turn reviews it and makes a decision. This is typically sent to the other creditors involved in your repayment plan, and each has a chance to voice their opinion. You may be required to attend a hearing if any object. If the court approves the motion, they issue an order to incur debt.
How Do You Pay Your Car Loan In Chapter 13
When you file for Chapter 13 bankruptcy, you propose a plan to pay back some or all of your debts over a three to five-year period. A bankruptcy normally discharges your personal liability on a car loan but does not wipe out the lender’s lien on the vehicle. So if you want to keep the car, you must continue making payments to your lender. Otherwise, the lender has the right to repossess the car.
In most cases, you pay off your car loan through your repayment plan. You make a monthly plan payment to the bankruptcy trustee and he or she sends a portion of that payment to your car lender. Depending on where you live, certain courts also allow debtors to exclude their cars from the plan and make regular payments outside of bankruptcy. However, if you don’t include your car loan in your plan, you may not be able to take advantage of certain benefits like a Chapter 13 cramdown .
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