When you're considering filing a Chapter 7 bankruptcy, you may wonder if you can keep your car or if it's possible to get another one during the process. Typically, getting a vehicle while you're in an open bankruptcy depends on your situation, and the type of bankruptcy you file.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is considered a liquidation bankruptcy. During this process, which typically lasts four to six months, your trustee can sell your non-exempt property in order to repay your creditors.
This might include your car if you aren't able to keep it with a motor vehicle exemption. Exemption limits are state specific, but there are federal bankruptcy exemptions which can sometimes be used as well.
If there's more equity in your car than you can exempt, your trustee may sell your vehicle in the bankruptcy. However, your trustee has to pay all fees associated with the sale of your car, so it has to make financial sense. In some cases, such as where the equity is only a few hundred dollars more than you can exempt, the trustee may allow you to keep the vehicle.
Getting an Auto Loan in an Open Chapter 7
When you aren't able to keep your car in a Chapter 7, you may be able to finance one while your bankruptcy is open, but it depends on the lender you're working with.
Often, lenders are hesitant to allow a Chapter 7 loan, because they don't want to risk the vehicle being included in the bankruptcy. If this happens, the lender stands to suffer a loss when your debts are wiped out at discharge.
Some lenders work with open bankruptcies, and the process of approval is much the same as getting a bad credit auto loan. However, you have to make sure that your 341 meeting of creditors has already taken place. Only after this, and with your trustee's permission, can you begin the process of applying for a car loan in an open Chapter 7 bankruptcy.
Getting a Car Loan after Chapter 7 Bankruptcy
Fortunately, if you can't find a lender to work with you during your bankruptcy, you don't have to wait long to get an auto loan due to the short Chapter 7 process. Since bankruptcy lowers your credit score, though, you need to apply with the right type of lender for your situation – usually a subprime lender at a special finance dealership.
At The Car Connection, we want to help you find a local dealer that can arrange your next car loan. We work with a coast-to-coast network of special finance dealerships that have lenders that offer post-bankruptcy auto loans. The process is quick, free, and there's never any obligation to buy. Get started today by filling out our car loan request form.