Bankruptcy is a difficult thing to be in, but there is a way out, and you can get back on your feet. Even though the economy is improving, many Americans discover that bankruptcy is their only option when their financial conditions become overwhelming or when a job loss or sickness transforms a promising future into a nightmare.
Bankruptcy provides you time and breathing room to pay down your obligations, or it might even wipe them out entirely. Bankruptcy is not a financial get out of jail free card. It has ramifications, one of which is that obtaining a new loan for a large-ticket item such as a car will be more difficult and more expensive.
Purchasing a vehicle after bankruptcy makes sense if you view it as a tool to help you better your financial condition and to get you to and from your place of employment. After bankruptcy, buying a car or truck makes no sense if it leads you to overextend your finances by forcing you to struggle to meet your loan payments—or worse.
7th and 13th Chapters:
In the United States, there are two forms of personal bankruptcy, each with its own set of consequences for a future automobile purchase. The court freezes your assets and distributes them to your creditors in a Chapter 7 bankruptcy, and your obligations are practically erased.
The Chapter 13 bankruptcy is fundamentally different from the Chapter 7 bankruptcy. Debt is restructured rather than dismissed in a Chapter 13 bankruptcy. The good news is that you will be able to keep your assets rather than having them liquidated to pay off debt.
Accepting a high-interest loan might be advantageous if you acquire a cheap, dependable automobile that will assist your job condition. Purchase a second-hand “transportation automobile” for less than 15% of your overall take-home salary. Save your money on a brand-new automobile until you’ve cleaned up your financial house and are no longer in danger of bankruptcy.
Here Are Some Pointers on Buying A Car After Bankruptcy
1. Improve Your Credit Score
Your debts should be discharged via Chapter 7 bankruptcy, but you should double-check your credit reports to be sure. If any of the accounts that should have been canceled as part of the bankruptcy are not, your credit score will suffer even more damage. If you see any problems, address them as soon as possible.
2. Rebuild Your Credit Score
If you have a good amount of loans that have survived your bankruptcy, make sure you pay them off as soon as possible. Get a secured credit card, which involves a cash deposit, frequently used to help people rehabilitate their credit. Your credit rating will increase if you make minimum payments on time and keep the account balance on the secured card below the credit limit. Before attempting to buy a car on credit, continue in this manner for at least a year.
3. Look for a Car Loan
Prospective purchasers with a bankruptcy on their credit history will almost always face exorbitant interest rates. However, these costs might vary greatly. Start your search for a vehicle loan at your bank or credit union if you have a solid relationship with them.
4. Set your sights on a dependable, low-cost vehicle.
Because of your bankrupt past, you will be subjected to higher-than-average interest rates, making it a poor financial decision to get the purchase costlier by selecting a high-priced new automobile. Maintaining a low-cost form of transportation should be a priority as you rehabilitate your credit.
5. Pay Your Bills on Time
Once you’ve bought a car, be sure you keep up with your payments. You’d be without transportation and in far greater financial problems than before the purchase. Give no justification for the dealer or finance institution to contemplate repossessing your vehicle.
The longer you can put off making a major purchase following your discharge, the better off you’ll be. While bankruptcy will always remain on your credit record for 7-10 years, it will also eliminate the majority of the other blemishes, allowing you to begin rebuilding almost immediately.
Following the advice given above can help you receive the finest bargain possible.
Remember that buying a used automobile and getting a car loan that you can afford without putting your financial health at risk will help you rebuild your good credit after bankruptcy and keep your financial health in the future.