Let’s face it, a car is a necessity in New Jersey. It is imperative to have some form of transportation to get to and from work. If you can’t get to work, then you may not be able to sustain a job which can impact your ability to rebuild your credit after bankruptcy.
Many clients ask me if they can get a car after filing for Chapter 7 or Chapter 13 bankruptcy. The answer is yes, but there are some important factors to keep in mind when it comes to bankruptcy and buying a car. Because Chapter 13 cases last 3-5 years, trustee approval is required. This is not required in Chapter 7 because they usually close in about 4 months.
Most people don’t have enough cash on hand to buy a car outright. This means you will have to get financing for your car. Don’t worry, getting a car loan is still an option. Lenders may be willing to extend you new credit. A car loan is a great way to re-establish your credit, but there are some pro and cons to getting a car loan after bankruptcy.
The biggest pro to getting a car loan is that it can help you re-establish your credit. Making payments on time will allow you to build a positive credit report. Car prices can be prohibitive so a loan is often your best and only way to go when buying a new car.
You have likely seen car commercials advertising 0% financing. This may not apply to someone with a recent bankruptcy on their credit report. Many lenders may be hesitant to give you financing, or will charge you extremely high interest rates. Subprime lenders may charge you as high as 30%. If you have a steady source of income you may be able to finance a car at a much lower rate. Do your research before getting your first post-bankruptcy car loan. Educate yourself about various car lenders and credit unions that are willing to work with people who have a bankruptcy on their record.
Generally, the longer you wait, the lower your interest rate will be. However, if you cannot wait, you may still be able to find a reasonable new car loan if you research your options.
There is life after bankruptcy and it starts here. It’s always a good idea to talk to an experienced bankruptcy attorney before making your first post-bankruptcy big purchase. Please contact me today for a consultation.
