Yes, it is possible to get a car loan after filing Chapter 13 bankruptcy, but it can be complicated and difficult. As you probably know, Chapter 13 bankruptcies last longer than the more common Chapter 7 – often 36 to 60 months, and no liquidation of assets is involved. Rather, it is a process of reorganization, whereby a trustee is responsible for reviewing a payment plan proposed by the debtor, and making sure that funds are allocated to each creditor on a regular basis as set out in that plan.
Obtaining Trustee Approval
Before you can apply for any new financing, you must get approval from your court-appointed trustee. A lender will need a letter from the trustee approving the loan request before they can proceed with a loan. This is known, in legal parlance, as an “Authorization to Incur Debt.” You may be required to increase the amount of money that you commit to your debt repayment plan before you are allowed to take on a new loan, as well.
Trustee-Approved Monthly Budget
The trustee will be very frugal with the money you are allowed to commit to a new loan. They will want to see a new accounting of your income and expenses. Be sure to include a fair estimate of fuel, insurance, and maintenance. Be prepared to have to buy a used vehicle. You may only be allowed a monthly payment of $250 or so.
From a lender’s perspective, you may be a bit of a risk. They do not want to see the interest they can earn lowered by the Chapter 13 proceedings. You may have to shop your loan around for some time. Do not be afraid to look online for specialty lenders, or loan-matching services like ours that can place your application with a lender willing to fund your loan. You can apply online here. We have many lenders and dealers in our network who work with people with bankruptcy issues.