If you’re going through a bankruptcy or recently had your bankruptcy discharged, where do you go to get an auto loan? You have three options: your current lender, a subprime lender, or a buy here pay here (BHPH) dealer. All three may be able to help you get financed, but each has different requirements.
Car Dealerships That Work with Bankruptcies
If you’ve never missed a payment on your current car loan, and you have a good relationship with your current lender, you may want to consider going to them first. As long as the bankruptcy has been discharged, and not dismissed, you may have a decent chance of getting approved for auto financing with your current lender.
If your current lender turns you down even if the bankruptcy has been discharged, you have other options to choose from. As long as you go to the right dealership and meet the lender’s requirements, you shouldn’t have any issues. When picking a dealer, you can go to a special finance dealership or a BHPH car lot.
Special finance dealers work with subprime lenders that specialize in bad credit auto loans. Subprime lenders check your credit score and reports to determine approval and prefer to see that a bankruptcy has been discharged before approving you. But they look at other factors such as your income, employment history, down payment, and residence stability, to name a few, to determine approval.
BHPH dealerships, on the other hand, loan in-house and don’t typically run credit checks. They can get you a vehicle and offer financing all in one place, many times on the same day. BHPH dealers base approval on your income and down payment. The problem, though, is that because they don’t run credit checks, they may not report loans or payments to the credit bureaus. This means you wouldn’t be able to improve your credit over time, so you might need to make other plans if this is a goal of yours.
Types of Bankruptcies and Approval Odds
When it comes to getting a bankruptcy auto loan, the type of bankruptcy you file does affect the financing process and your approval odds. There are two types of personal bankruptcies you can file: Chapter 7 and Chapter 13. Both have the same end goal of getting you free of debt, but they’re not the same.
A Chapter 7 bankruptcy is a liquidation bankruptcy, which means you may need to give up any non-exempt property, such as a car, to repay your creditors. The process is relatively short, generally lasting only three to six months before it’s discharged.
Because this type of bankruptcy doesn’t last long, most subprime lenders aren’t going to finance someone with an open Chapter 7. They want to see that this type of bankruptcy has been discharged before considering approving you for an auto loan.
A Chapter 13 bankruptcy is a reorganization bankruptcy. The court sets up a repayment plan that lasts either three or five years. You typically get to keep your assets, and you pay back at least a portion of what you owe your creditors over the span of your bankruptcy.
Because subprime lenders know it takes years to complete, most are willing to approve someone for a car loan with an open Chapter 13. You just need to get a sample buyer’s order from a dealership and approval from the court and your trustee.
Need Help Finding a Car Dealership?
No matter where you’re at in the bankruptcy process, The Car Connection can help you find a local dealer that can help you get financed. With our auto loan request form, and nationwide network of dealerships that know how to handle unique credit situations such as bankruptcy, we want to connect you to a local dealer that can help you get financed. Get started right now to get the bankruptcy car loan you need!