You Could Buy a Car Even Before Your Bankruptcy is Discharged
Richard Fonfrias, J.D.
Chicago's Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
Many people feel powerless after a bankruptcy. If you share that feeling, you should know that you have more options than you might think.
I know many families who, after a bankruptcy, need a primary car - or a second car.
Here are 6 key facts to consider if you're thinking about buying a car:
Fact #1: Even high-income earners file bankruptcy.
In this economy, many people have been forced to file bankruptcy - even people who earned high incomes. Bankruptcy was written into the U.S. Constitution so people who needed a fresh start could get one, without shame or humiliation. I have represented many "rich people" in bankruptcy who were no longer rich due to medical bills, a lost job, a business failure, or any number of reasons beyond their control. Your future employers and creditors know these economic circumstances are not like any we've experienced before. They look at potential employees and potential borrowers not as problems, but as opportunities.
Fact #2: A car loan is a good way to rebuild your credit.
One of the best ways to rebuild your credit it to get new loans and make your payments on time. A car loan should be part of your credit repair strategy as it could raise your credit score substantially, often as much as 100 points.
Fact #3: Getting a car loan after you file for bankruptcy isn't that difficult.
Many automobile dealers and lenders now work with people after they have filed for bankruptcy. In fact, dealers and lenders know that once a bankruptcy is discharged, the family is no longer saddled with a long list of monthly payments or large credit card debt. As a result, the person or family is often a good credit risk because making car payments should no longer be a problem. The test is whether you have a steady job with ongoing income.
Fact #4: In most cases, you should not reaffirm your current car loan.
Some lenders will finance a car on the same day you file for bankruptcy. So I caution you not to reaffirm your current car loan even if you need a car to get to work. Your bankruptcy lawyer should have given you this advice. Further, most lenders do not accurately report the reaffirmed loan to the credit bureau, so your future on-time payments may offer no help in repairing your bad credit or do anything to improve your credit score.
Fact #5: You will likely get a near-new car with low miles.
Please don't think that because of your bankruptcy, you'll qualify only for an old car with high mileage. In fact, lenders prefer to finance near-new cars that have already taken the new-car depreciation - have low mileage - and may still be covered under the new-car warranty. Some lenders approve loans for as much as $35,000.
Fact #6: You don't have to have huge down payment.
No question, the more money you put down, the lower your monthly payments will be. Even so, many lenders offer programs with no down payment whatsoever.
Here's what you can expect from car dealers and lenders:
-- Some dealers and lenders specialize in financing vehicles for people who have filed bankruptcy, so you receive the respect and attention you deserve.
-- You benefit from the dealerships' large inventory of vehicles. Plus, most dealers have car-locator programs, so if you don't find exactly what you want, they'll find it for you.
-- If you don't have transportation to the dealership, ask the dealer to send a courtesy vehicle to pick you up. Most are happy to offer this service at no charge.
-- In some cases, dealers submit your loan application and get it approved before you come to the dealership. This is the most efficient way of making sure neither you nor the dealer is wasting time, wondering if your loan application will be approved.
-- In most cases, you'll know whether you've been approved for your car loan within 15 minutes.
-- Often, you can drive your car home the same day you get your loan approved. The dealer may need to see some paperwork, such as your paystub, your utility bill, and some form of ID.
If you have any questions about buying a car during or after bankruptcy, please don't hesitate to call. As an experienced Chicago bankruptcy lawyer, I specialize in bankruptcy in Illinois, credit repair and bad credit help. I may be able to refer you to dealerships and lenders that approve loans for people who have been through bankruptcy.