Yes, you can get a car loan with an open Chapter 13 bankruptcy in many cases. Most subprime lenders understand that a Chapter 13 bankruptcy takes years to complete, and as long as you have the right paperwork and go through the approval process with the bankruptcy court, you shouldn’t run into any issues.
Step 1: Get a Sample Buyer’s Order
No matter if you plan on financing through a buy here pay here dealership or a subprime lender, you need a sample buyer’s order from the dealer. Pick a vehicle that’s reasonable and fits your basic needs, and have the finance manager fill out a sample buyer’s order. The sample buyer’s order needs to include these two things:
- The phrase “or similar” next to the car you chose in case the vehicle gets sold while your paperwork is reviewed by the court.
- The highest possible interest rate you may receive.
Once you have the sample buyer’s order, you can head on to the next step.
Step 2: Go to Your Trustee
Go to your court-appointed trustee with the sample buyer’s order. Make sure you explain fully and honestly why you need this vehicle during your open Chapter 13. When you meet with your trustee, you’re going to sign some paperwork, and they decide if your reasoning is valid from there. Your trustee looks at your current repayment plan, and determines whether or not you can handle this additional debt.
If you’re denied, you’re going to have to start the process over again and get a new sample buyer’s order. Don’t be afraid to ask your trustee why they turned you down. If you’re approved, however, your trustee takes it to the court to finalize the process, which could take several weeks.
Step 3: 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 they’re 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, you’re 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.
Need Help Finding a Lender?
A Chapter 13 bankruptcy takes three or five years to complete, and, for some people, that’s a long time to go without replacing a car. Getting approved for auto financing during an open Chapter 13 takes time as well, so make sure you follow each of the three steps before jumping into subprime financing.
If you’re in the middle of a Chapter 13 bankruptcy and are ready to buy a vehicle, but aren’t sure where to find the best lender to work with, let The Car Connection help. We want to connect you to a local dealer. Get started by filling out our simple and free auto loan request form today.