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Can You Get a Car Loan After Chapter 7 Bankruptcy?

Yes, you can get a car loan after filing chapter 7 bankruptcy (often known as “Liquidation”). How you go about it differs based on whether or not the bankruptcy is discharged.

Scenario 1:  Not Discharged

If your bankruptcy has not been discharged, lenders are not allowed to offer a new loan to you until you have had your 341 meeting. During this session, the trustee for your case affirms the value of your assets and confirms the information in the schedule of debts. As you know, this person – typically an attorney – manages the disbursement of funds received from liquidation of your assets to your creditors. Once this meeting is over, you may begin to receive unsolicited financing offers from dealerships.

Scenario 2:  Discharged

Once your bankruptcy has been discharged, you will be inundated with offers from dealerships offering you a loan for a new or late model used car. Why? You are on the hook for the loan no matter what. You cannot file bankruptcy again for several years. The terms may not be favorable, though. Often, lenders are going to want to see a higher down payments, a shorter loan term, and require you to pay a higher interest rate. How high? Annual percentage rates in excess of 18% are common. You may want to check your state usury laws to ensure that you’re not charged in excess of the maximum allowable APR. More on that here.

Weighing Your Options

You will be considered a high risk for a loan after a chapter 7 bankruptcy. However, that doesn’t mean that you have to take the first loan offered to you. There are still many online options available. You can use broker websites that will shop your loan to several specialized lenders on your behalf. Here at Keystone Auto Loans, you can submit an application online in about 3 minutes, and we will go to work matching you to a dealer or lender willing to approve you for financing. This should help you find the best possible loan, and minimize the chances of being declined for credit during a walk-in inquiry at a bank or dealership.

About the Author

The author has many years of experience in automotive finance and insurance. However, each consumer's situation is unique. It is best to contact a finance specialist for further assistance.
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