Prior to filing bankruptcy protection, there are a few things regarding your personal situation that you may wish to consider, including the condition of your car. If your vehicle is in need of repair, or if the warranty has expired, you may have to replace it in the near future. It may be to your advantage to replace your vehicle before you file for bankruptcy.
Once you file for bankruptcy it will only be a matter of days before it is reflected in your credit file. A bankruptcy will stay on your credit record for up to 10 years. If you file for Chapter 7 bankruptcy you will not need the court's permission to take on additional credit during the process. However, debtors who file for Chapter 13 bankruptcy will need to have the approval of the bankruptcy court before being allowed to take on any credit. It is difficult to get credit once you file for bankruptcy but not impossible. There are lenders who will finance your car loan, even with a bankruptcy. However, you will pay a much higher interest rate for the loan. This is the primary reason why you are better off purchasing a vehicle prior to filing bankruptcy.
Before you speak to a lender, pull your credit report and make sure that it is accurate. You want the highest score you can get before applying for an auto loan. You can put yourself in a better bargaining position by getting pre-qualified before you start shopping for a new vehicle.
There is no need to tell anyone that you plan on filing for bankruptcy. Proceed through the buying process in a relax, confident and positive manner. Shop around with various lenders in order to get the best interest rate and terms possible. You can shop multiple lenders for a vehicle loan within a two-week period. It will have the same effect on your credit report as with a single lender. Remember, new cars depreciate up to 35 percent within the first two years. So, you should seriously consider the advantages of purchasing a used car that is still under warranty.
Determine how much you can afford for a car payment. This is not the time to be extravagant or to go out and put the down payment on your credit card. However, there is nothing wrong with buying a newer vehicle that has better gas mileage and lower payments. After filing for bankruptcy, you'll have to be able to make the payments in order to keep the vehicle.
Your car payments need to be current when you file for bankruptcy. To avoid losing your car during bankruptcy, you will be required to sign a reaffirmation agreement, which makes you legally obligated to continue paying off the vehicle loan after you file for bankruptcy. The outstanding balance of the loan will not be wiped clean after your bankrupcy case is discharged.
