Under bankruptcy law, the auto loan terms on your car loan may still be applicable depending on the type of bankruptcy you are pursuing. Chapter 13 bankruptcy is a reorganization bankruptcy in which all creditors are paid, however this simply takes place over a three to five year period. In these instances it is possible that the car loan terms you agreed to at the beginning of the loan period will hold true. Your payments may stay the same or similar and you are still liable for the debt. However, if this is not feasible a lender is allowed to extend a lease agreement to you and you simply pay the lease, but do not own the vehicle. In Chapter 7 bankruptcy, all assets are liquidated, which of course means you lose the car and are liable for any amount of the loan that is not covered by the value of the asset (vehicle).
Following your recovery from a bankruptcy, you will obviously be looking for a car. Be mindful that it will not be an easy or smooth road to finding a lender following a bankruptcy case, however there are several lenders who offer a bankruptcy auto loan or bad credit car loan program. These programs are specifically designed for those individuals who have been through a bankruptcy (either Chapter 7 or Chapter 13) and will most likely have considerably higher car loan rates and much stricter car loan terms. However it is a good idea to begin searching for a car loan following bankruptcy IF YOUR BUDGET ALLOWS. This is very important, because it is very financially irresponsible to incur more debt following a bankruptcy unless you are assuredly able to meet the payment requirements of the creditor in the first place.
Obtaining a bad credit car loan following bankruptcy can actually help you get back on your feet financially if handled correctly. Making the payments on time, every time is a great way to begin to rebuild your credit even if you are still in the midst of bankruptcy proceedings. Most of the time, while the car loan terms may be strict, the minimum requirements to obtain a bad credit loan are fairly open. Lenders realize that bad credit is not always necessarily the client’s fault and should not preclude them from obtaining a reliable vehicle to drive. Most requirements consist of a bad credit car loan are a reasonable income level, open or finalized bankruptcies, and a limit of one bankruptcy per person.
If you meet the requirements above and can commit to paying your loan on time, you can obtain a bankruptcy auto loan and begin rebuilding your credit almost immediately following a bankruptcy. Very few creditors in other industries will be quite so leniant or understanding. The auto loan industry provides this assistance because of the inherent value of the asset you have financed through them. Plus the car loan rates you will be paying will help to make up for any risk you represent to the company.