Getting a car loan after bankruptcy can help you rebuild your credit, since one of the consequences of the bankruptcy process is a lower credit score. No matter if you filed a Chapter 7 or Chapter 13, it's typically possible to get a post-bankruptcy car loan. However, you have to make sure to visit the right kind of dealer.
Post-Bankruptcy Car Loan Requirements
In order to finance an auto loan after bankruptcy, you're most likely going to need to find a subprime lender that works through a special finance dealership. These lenders are prepared to work with post-bankruptcy borrowers, and have a number of requirements you have to meet before considering you for a loan.
The first thing you have to do is get your discharge paperwork. Once your bankruptcy is discharged, it means you've successfully completed the process as planned, and the court mails you an order of discharge. Most lenders require you to provide this as proof that you've completed the bankruptcy process.
In addition to your discharge paperwork, you have to meet lender qualifications in order to be considered for a bad credit car loan. Though the requirements vary by lender, in most cases, you have to provide the following in order to get an auto loan after bankruptcy:
- Proof of income – Subprime lenders require you to have a current computer-generated check stub showing income of at least $1,500 to $2,000 a month before taxes, from a single source of income.
- Proof of residency – A current utility bill or bank statement in your name, with the address listed on your application.
- Proof of a working phone – A current landline or contract cellphone bill in your name. Prepaid phones typically don't count.
- Personal references – A list of five to eight personal references complete with names, phone numbers, addresses, and email. You can use family, friends, or coworkers, as long as they don't share your address.
- A down payment – A down payment is usually required when you're a bad credit borrower, but the amount needed can vary. Typically, lenders require a down payment of at least $1,000 or 10% of the vehicle's selling price, whichever is less.
Was Your Bankruptcy Dismissed Not Discharged?
If your bankruptcy wasn't discharged but was dismissed instead, it means you didn't successfully complete the process of either a Chapter 7 or a Chapter 13. There are several reasons your bankruptcy can be dismissed rather than discharged: bankruptcy fraud, abuse of the bankruptcy process, not following court orders, simply a filing mistake, and more.
If your bankruptcy was dismissed for a simple error, or without prejudice, you can file again right away with the opportunity to complete the process. However, if your case was dismissed for a more serious matter, or with prejudice, you may be barred from filing bankruptcy again for 90 days to one year. In the most severe cases, you can be permanently blocked from ever filing bankruptcy again.
Do I Have to Wait Before Applying for a Post-Bankruptcy Car Loan?
The beauty of a bankruptcy, though no one wants to have to go through one, is that coming through one with a discharge wipes the slate clean of many, if not most, of your debts. In most cases, once it’s discharged, you can look into getting a car loan right away. Despite the lower credit score you're left with, getting an auto loan after bankruptcy can be as simple as finding the right lender to work with.
Not all lenders work with people in unique credit situations such as bankruptcy, which is why we want to help. Here at The Car Connection, we work with a coast-to-coast network of special finance dealerships that have lenders available to work with people who have successfully completed bankruptcy. To find a dealer in your area, simply fill out our fast, free, and easy car loan request form, and we'll help you get on the way toward your next vehicle.