Purchasing a Vehicle After You File Bankruptcy
Richard Fonfrias, J.D.
Chicago’s Financial Rescue & Bankruptcy Lawyer
Fonfrias Law Group, LLC
After you file bankruptcy is not the best time to buy a vehicle, but it’s also not the worst. After all, now you have erased nearly all of your bills in your bankruptcy. So now you can afford to buy a car or truck.
You will have to pay a higher interest rate because of your bankruptcy. This is because your credit report shows you to be a higher credit risk. Even so, you can still get a loan to purchase a car.
Here are smart shopping tips for anyone buying a car after bankruptcy:
1. Shop around for a car loan as if you never filed for bankruptcy. Lenders approach bankruptcy differently. The more places you shop, the more interest rates you are likely to be quoted.
2. Never accept the first offer you receive. After bankruptcy, many consumers are so excited to buy a car that they jump at the first offer they receive. Don’t. You are likely to receive several offers so play it smart and wait. Later offers could be even better.
3. Make sure your car choice is reasonable. Don’t shop for a new luxury car. If you’re in Chapter 13 bankruptcy, which can take up to five years, your bankruptcy trustee might need to agree to your purchase during your bankruptcy. So look for something reasonable. A good, reliable used car that will get you to and from work makes far better sense than something that doesn’t match your needs. Also, if you are out of bankruptcy, the longer since your bankruptcy, and the better you have managed your finances, the more likely you are to get a favorable interest rate.
4. Stay away from Buy-Here-Pay-Here Dealers. Consumers often assume they can’t get a car loan so they go to a dealer who accepts payments directly. But those dealers usually charge very high interest rates and huge down payments for vehicles that often have more than 100,000 miles on their odometers. The problem is that the car may break down long before you have finished making payments.
Follow these tips and you’re likely to make a smart purchase even after you’ve filed bankruptcy. If you have questions, it’s always best to call a licensed bankruptcy attorney to help you out. I am always available for a call to discuss.