Getting a Car Loan after a Chapter 7 Bankruptcy

If you filed a Chapter 7 bankruptcy and are approaching its discharge, you may be wondering what the course of action is in applying for a car loan.

Post-Bankruptcy Car Loan Process

After a Chapter 7 bankruptcy, you want to be sure to start off on the right foot with your finances and your credit. Getting an auto loan after bankruptcy can be a great way to do that. Once the bankruptcy has been discharged, you can move forward with the car buying process. In order to make sure everything goes smoothly, follow these four steps:

  1. Getting a Car Loan after a Chapter 7 BankruptcyGet your credit reports and score – Make sure you know where your credit score currently stands and what’s listed on your credit reports. It’s easy to get your free credit score online. Lenders generally look at your FICO score, which you can either purchase from FICO, the credit bureaus, or a number of third-party sources. You’re also entitled to a free copy of your credit report every 12 months from each the three major credit bureaus: Equifax, Experian, and TransUnion. These can be requested at If there are any inaccuracies or negative marks that don’t belong, make sure you dispute them and have the credit agency fix them as soon as possible. Also, look to see if your bankruptcy discharge is listed. If it isn’t, be sure you have a copy of your discharge letter ready to show the dealer.
  2. Calculate a budget – Before you search for a car, make sure you have a budget ready to go. You don’t want to overpay on an auto loan, or be turned down for not having enough income. Using online tools, you can estimate what your monthly payment will be, and how much vehicle you can afford.
  3. Make sure you meet basic requirements – In addition to making sure you can afford a car loan, you must also meet the lender’s basic requirements. These include having earned income of at least $1,500 to $2,000 a month, a working telephone (not a prepaid cell phone), and proof of residency.
  4. Prepare for other fees – On top of budgeting for a car loan, you need to bring some cash for a down payment, any extended warranty, and tax, title, and license (TTL) fees. A down payment is a requirement you typically can’t avoid with bad credit. You can expect a minimum down payment of $1,000 or 10 percent of the vehicle’s selling price, whichever is less. As for TTL fees, these can't always be included in a loan, so you may be expected to pay them out of pocket, as well.

The Bottom Line

Once your Chapter 7 bankruptcy has been discharged, you want to review your credit reports, view your FICO score, assemble the proper documentation, and save up for a down payment and other fees before visiting a car dealership.

If you’re nearing the end of your bankruptcy and are ready to buy a vehicle, let The Car Connection lead the way. With our simple auto loan request form, we want to connect you to a local dealer that can help you get financed. We work with a nationwide network of dealerships that know how to handle unique credit situations.

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