Questions to Ask before You Buy a Car and File for Chapter 7

If you know you’re going to file a Chapter 7 bankruptcy, it's best if you wait until the bankruptcy is discharged before you buy your next car. You can still buy a vehicle before you file, but you run the risk of losing it in your Chapter 7. If you can’t wait until the bankruptcy has been discharged and need a car now, you need to sit back and ask yourself two important questions.

Question 1: Am I Able to Protect the Car’s Equity?

Questions to Ask before You Buy a Car and File for Chapter 7Most states require those who file a Chapter 7 to take the Chapter 7 means test if their income is above the median income for that state. If you either pass the test, or your income is below the median, you can file a Chapter 7.

As for the assets you get to keep during a Chapter 7, this depends on what your state’s property exemptions and amounts are. If your vehicle is under your state’s exemption amount, you’re in good shape (most states allow you to keep at least one car, according to the legal experts at

However, if your vehicle’s equity is higher than the exemption amount, and/or it’s a secondary car, you may be required to give it up.

Question 2: Do I Truly Need This Car Now?

You need to ask yourself if you need a vehicle right this second. Some situations make sense, such as needing a bigger car for your family, or totaling your previous vehicle.

While these are valid reasons for needing a new car, whether or not it’s worth it is determined by your bankruptcy trustee. Make sure you pick a vehicle that’s reasonably priced.

The Bottom Line

Before you decide to buy that car, make sure you know what you’re getting yourself into if you know you plan on filing a Chapter 7 bankruptcy. If you’re behind on your current loan, make sure you talk to your lender first before you consider filing – they may let you skip one or more payments and add them to the end of the loan term, which may help you avoid filing for a Chapter 7. Your lender is likely more willing to work with you if you let them know what’s going on and explain your situation.

If you recently filed for bankruptcy and are looking for a dealer to work with, we want to help. At The Car Connection, we want to connect you to a local dealership that has the lending resources available to help those dealing with bankruptcy. Get started by filling out our simple and free auto loan request form today.

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