The moment a Chapter 13 bankruptcy is discharged can be a great time to get a car loan. But, the cost for getting a clean slate following a bankruptcy is a lower credit score, so you have to make sure you work with the right lender.
Car Loans after Chapter 13 Bankruptcy Discharge
When you successfully complete your Chapter 13 bankruptcy, any remaining debt that wasn’t repaid over your three- or five-year plan is typically forgiven, and you’re issued a discharge letter from the court. This letter needs to accompany your other documentation when you apply for a car loan.
Because your credit score is lower as a result of your bankruptcy, chances are you’re going to have to get financing from a subprime lender that’s willing to work with your situation. These lenders only operate through special finance dealerships, so you can’t sit down with them one on one and apply for a direct loan, as you would at a bank or credit union.
Chapter 13 Bankruptcy Car Loan Requirements
When you visit the dealership, you need to bring certain documents with you in order to qualify for a bankruptcy loan. The specifics vary by lender, but all subprime lenders generally require these documents once you complete a Chapter 13:
- Proof of income: A recent computer-generated check stub showing year-to-date earnings
- Proof of residence: A bill in your name for the address listed on your application
- Personal references: A list of six to eight personal references complete with names, addresses, and phone numbers (none living at your address)
- Proof of a working telephone: A contract cell phone or landline in your name at the address listed on your application (prepaid phones aren’t acceptable)
- Proof of bankruptcy discharge: You need your discharge papers from the court
- A down payment: Lenders typically require $1,000 down, or 10 percent of the vehicle’s selling price – whichever is less
- A valid driver’s license: Showing the address listed on your application to prove your identity
Though your lender may require you to have more – or less – documentation, these are the standard requirements. It always pays to be prepared. Before heading to a special finance dealership, you should also get a copy of your credit reports and know where your credit score stands.
Car Loans after Chapter 13 Dismissal
If you find yourself with a bankruptcy dismissal, rather than a discharge, it’s not likely you’re going to easily get a car loan, even when financing with a subprime lender.
Dismissed bankruptcies can happen for many reasons – sometimes something as simple as paperwork errors or as massive as fraud – but it’s not the same thing as a discharge. The key difference here is that a dismissal means the process was never successfully completed.
Reasons your Chapter 13 may have been dismissed include:
- Not completing the required credit counseling
- Failing to pay your court filing fees
- Not filing all the proper forms or their supporting documentation
- Missing your mandatory meeting of creditors
- Not completing your agreed upon repayment plan
According to legal website Nolo.com, if you’re unable to get debt forgiveness through bankruptcy discharge, a dismissal closes your case. This leaves you liable for all your debts without the protection of an automatic stay, which means collectors can resume coming after you for payment.
Finding a Car Loan after Chapter 13
If you’ve successfully completed your Chapter 13 bankruptcy, received your letter of discharge, and need an auto loan, you may not know where to turn. Here at The Car Connection, we can help with that. We work with a nationwide network of special finance dealerships that have the lending resources to help people in many types of credit situations get into the cars they need. Our process is simple, free, and fast. Fill out our online auto loan request form now, and we’ll get to work matching you with a local dealer!