When To Buy A Car After Bankruptcy

Can I Buy A Car For Cash

While you can, you should wait until after the Chapter 7 trustees meeting. In Illinois, you only have a $4,000 exemption in personal property. Not much of a car you can buy for under $4,000.

After filing Chapter 7, you might be able to save enough money to buy an inexpensive car in a few months. Or, you have enough for a down payment.

How To Plan For Bankruptcy

The novel coronavirus and COVID-19 pandemic has caused a serious economic downturnand one that may well turn out to be significantly worse than the Great Recession of 2007-2009 that hit with the bursting of the housing bubble and the subsequent collapse of many financial institutions. Given the spike in bankruptcy filings that occurred as result of the last major recession, the current pandemic-induced recession will undoubtedly result in a tsunami of bankruptcy filings. If youre watching your financial situation deteriorate and think filing for bankruptcy may be necessary, this article provides guidance on how to plan for bankruptcy.

What Will I Do About A Car

You likely believe that once you declare bankruptcy, you will have a hard time qualifying for an automobile loan. Our eBook with walk you through everything you need to know about buying a car during and after bankruptcy. Learn about your options so you can make the best decision for your circumstances.

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How Do I Know If I Should File For Bankruptcy

At The Robert Russell Law Office, we are committed to providing each and every one of our clients with compassionate and trusted representation at reasonable fees. We know that every case is different, which is why we review your situation and discuss both your bankruptcy and non-bankruptcy options with you.

If youre considering bankruptcy as a debt relief option, contact our Seattle and Vancouver bankruptcy attorneys today so we can help you make an informed decision for your financial future.

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Where To Find Auto Loans After Bankruptcy

Businesses offering financing without a credit check might seem like your best chance at getting a loan, but the potential damage to your pocketbook is not worth the risk.

When shopping for your auto loan, consider options outside of the dealership and look for financing through your bank, credit union or online lender before shopping for a car.

To find a lender who will work with your credit issues, youll have to shop around. If your loan applications get declined, be sure to ask the lender how you can improve your chances of approval next time.

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Be Careful; Be Very Careful

There are unscrupulous car salespersons. They will try to sell a junk car at a high price with high interest rates.

Shop around.

Many lawyers have dealers who sell cars to Chapter 7 clients. These dealers have decent used vehicles at reasonable terms. I know our firm has a couple of places we refer clients.

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?

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The Types Of Debt You Have Dont Quality For Bankruptcy

This comes as a surprise to many people who dont know much if anything about bankruptcy, but not all debts qualify to be included in your bankruptcy case. Read the list below carefully as there are exceptions to some of them. Here are a number of types of debt that typically cannot be included in a bankruptcy filing:

Child Support: If youve fallen behind on court-ordered or court-approved child support payments, those are debts you have to make good on. Child support debt cannot be included in a bankruptcy filing.

Alimony: Similar to child support, if youve fallen behind on court-ordered or court-approved alimony payments to an ex-spouse, that debt also cannot be included in your bankruptcy case.

Taxes: Most taxes cannot be included in your bankruptcy, especially state and federal income taxes. There are exceptions to this, though rare, so be sure to go over the details of any tax debts you owe with your bankruptcy attorney. Any tax debts from recent years will definitely not be included in a bankruptcy, but it may be possible to include some that are older than three years.

Financing A Car After Bankruptcy

You may have already received letters from car dealerships offering you credit to buy a car, and its true. You should be able to get a car loan.

Should you? Think it through.

On the plus side: If you make consistent, on-time payments. A loan is a step for you to re-establish your creditworthiness. If you dont have the cash needed to buy a car outright, financing may be your only option.

The flip side: Offering you credit doesnt mean offering you good credit. Expect high interest rates maybe really high rates. Shop around and see what dealers or lending institutions are going to charge you.

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Tips On Buying A Car After Bankruptcy

If youre going to buy a car following bankruptcy, theres a lot more to consider than gas mileage and how it corners.

• Make sure your credit reports are up to date. Following Chapter 7 bankruptcy, your debts should all be discharged, but if your credit report didnt get the memo, it could lead to even more credit problems. You should dispute mistakes on your credit report with the major credit reporting agencies to have them fixed.
• Work to rebuild your credit. If you have any loans not settled in the bankruptcy, be sure to pay them on time. Getting a secured credit card, which requires a cash deposit, is a tried-and-true credit rebuilder if you pay on time and keep the balance below the cards credit limit. Paying on time is true for all your loans, including a car loan if you cant buy with cash.
• Get a vehicle that fits your budget and transportation needs, not your ego. When youre in better financial and credit shape, you can splurge on the car of your dreams. This isnt that time. Make sure you can afford it. Know how much you can put down and how large a monthly payment you can comfortably handle.
• Get a fixed interest loan rather than anything thats adjustable. Certainty is your friend. A loan that might increase your monthly payments in the future, is risky.
• Dont finance for longer than 5 years. Longer terms lower monthly payments, but you pay much more interest the longer you finance it.

When Should You File Bankruptcy And Can You Do It Yourself

A surprising number of people try to scrape by as best they can, sometimes for years, with seriously challenged credit before finally deciding to file for bankruptcy. Maybe its the stigma attached to filing bankruptcy that makes people turn to it only as a last resort when things get really desperate. Those months and years of stress can take a serious toll. The thing to keep in mind is that bankruptcy laws are intended to provide relief and give you a fresh start when your debts become unmanageable, often due to circumstances entirely beyond your control.

No one knew a global pandemic was coming, nor did most people foresee the severe economic consequences it would have on so many people who have lost their jobs. The direct relief payments from the federal government helped a little but now feel like a drop in the bucket. The extended unemployment benefits both in duration and amount certainly helped, but all that assistance has long expired, and it seems doubtful as to when or even if more aid will be forthcoming from Congress. If youve lost your job, have little to no savings, and no prospects to recover gainful employment in the near future, there is really no reason to wait, and no one in in their right mind would criticize you if you decide to file for bankruptcy. In fact, it might be the smartest decision you make in these uncertain times.

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How Long After Bankruptcy Can I Buy A Car

The wait depends on the mode of purchase the person intends to make. Car sellers have strict policies related to this type of buying. On the other hand, once a person is declared to have hit bankruptcy, the tag remains for a long time.

Even if one is financially stable following brief periods of bad times, large investments need due care and attention due to strict laws established in different countries. If the person wants to buy his or her car instantly, that is, without taking any loan, three months are sufficient for the necessary formalities and everything else.

In the opposite case, the guidelines of loan provision to bankrupt people take a bit longer. This extends the aforementioned time period for another month. In other words, the person needs to wait for at least four months if the car purchase has to be made after applying for a car loan.

Even if all other things fall in place at the right time, subsequent checks and confirmatory documents need to be produced at each and every point. This does not directly lead to delay but further complicates the process, making it a bit tiresome for the buyer.

A sure shot solution is to begin the proceedings as soon as possible. It is essential to do so using fair means only as the tag of bankruptcy is in itself a stubborn one to get away with. Six months is the ultimate limit so one must proceed accordingly.

In Summary:

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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Waiting To Apply For A Car Loan After Bankruptcy

Filing for bankruptcy isn’t something to be ashamed of, and you shouldn’t be afraid to apply for auto loans because of it. It’s actually a common thing, and believe it or not, so are post-bankruptcy auto loans.

If your bankruptcy has recently been discharged and your vehicle was liquidated or surrendered, you’re probably wondering how long you should wait to apply for financing.

The rule of thumb is to wait a year or two after you receive your discharge papers to make a large purchase like a vehicle or a home. This gives you time to start rebuilding your credit score back up to good standing with secured credit cards or other small personal loans.

At Auto Credit Express, we understand that waiting multiple years isn’t always a viable option. If you had to get rid of your vehicle during your Chapter 7 or Chapter 13 bankruptcy, chances are you’re in desperate need of a new one quickly, and we can help.

How Long Do I Need To Wait Before Buying

There is no clear and present answer to this question. Like we said in the last section, you should ideally wait at least a month, but there is no set timeframe before you can start buying a new vehicle. As long as your credit is repaired after the bankruptcy and your final discharge has come and gone, you can technically purchase a car whenever you want.

Hopefully answering these questions has helped answer the questions you were having. If you have any more, dont hesitate to give us a call here at Broadway Auto Credit. This is one of our specialties, so wed be happy to help no matter your situation.

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Buying A Car With Credit

You may be eager to re-establish your credit after bankruptcy, and lenders will be excited to extend new credit. Although financing a car after bankruptcy can help you rebuild your credit, you will likely face high interest rates.

If you need a car immediately, however, financing may be your only option. Still, you should not accept the first loan you are offered. Explore your options with banks and credit unions and fight for a fair interest rate from the car dealer. Your chances of getting a reasonable interest rate are better if you have a steady source of income, and if the credit union gives you a more favorable interest rate than the dealer, you can use this to negotiate.

Whatever you do, do not take on more debt than you can handle. If a 29% interest rate is unmanageable, explore other lenders and options.

Learn How To Drive Stick

Manual-transmission cars are usually less expensive than their automatic-transmission siblings. They’re also harder to sell because driving stick is rapidly becoming a lost art. When I learned how to drive, practically everyone knew how to operate a manual transmission. Nowadays, very few people do. Because of that, manual-transmission cars are not only cheaper than automatics, but they’re also harder to sell. Many times the very best deals on the lot are manual-transmission cars, especially in the fall when dealers have to move cars to make room for the next year’s models.

That’s how I wound up with a new car this time around, by the way. It was autumn and the dealer had two manual-transmission cars in a model that they knew I liked, so my favorite sales lady called me up and offered me a test drive. I wasn’t really looking for a new car, but I had some errands to run near the dealership anyway, so I took her up on her offer.

The deal was so good that by the time all was said and done, I couldn’t afford not to buy the car. My monthly payments would be almost the same, and my insurance actually went down a bit. And one of the biggest reasons was because I knew how to drive stick and the dealership was desperate to get the stick-shift cars off the lot.

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