Bankruptcy Auto Loans are loans for people that are currently in bankruptcy, or have recently been discharged from a bankruptcy. Bankruptcy auto loans are different than normal auto loans because the buyer has recently renounced legal responsibility to all (or most) of their debt. When that happens, every creditor listed in a Chapter 7 Bankruptcy loses a lot of money. Most creditors in a Chapter 13 lose a lot of money, but at least the customer pays some of it back in a 36-60 month plan.

The funny thing is that Chapter 7 Bankruptcies are easier to deal with than Chapter 13 Bankruptcies. Even though Chapter 7 Bankruptcies are much worse for the creditors involved, the discharge process is much quicker, easier, and there is less of a chance that the bankruptcy could be dismissed.

In both types of bankruptcy, the court date (341, or meeting of creditors) is about 30-days after the day you file. (***Important*** It does not matter if you change your mind before your court date. Once you file, the bankruptcy filing will show up on your credit.) At the meeting of creditors, your creditors have a chance to dispute any parts of the bankruptcy plan that they disagree with. For example, in a 13, if they disagree with the amount of money dispursed to them. Or in a 7, if they want to repossess the vehicle or force the filer to reaffirm it.

In a Chapter 7, the discharge is roughly 60-days after the meeting of creditors, as long as there are not complications. In a Chapter 13, the discharge is roughly 60-days after the plan is paid off. This can take years.

How do I buy a car in Bankruptcy?

If you are in an OPEN Chapter 7, you only have to meet some simple requirements, and we can help you buy your next car. The requirements have changed recently, but as of September 4th, 2008 the requirements look something like this:

• 45% Debt to Income Ratio (including your new car payment and $150 for insurance)
• 11% Payment to Income Ratio (used to be higher, but the lenders have tightened up recently)
• $2500 Gross montly income, $3000 total if applying jointly
• Current on all mortgages if you own your home and are keeping it.
• No more than one car loan per person. (only one auto loan at a time for individuals, married couples may have another loan as long as there is a history of paying two auto loans)
• Previous good loan credit. Preferably Auto Loan over $5000 paid for over a year. Mortgage history can often work too.
• At least 12 months of solid work history with no more than 2 employers.

If you are in a Chapter 13, some of the same rules apply. However, here are some that are different:

• You MUST get a signed letter from the judge that allows you to get a car payment up to $xxx.xx per month and a total loan amount of less than $xx,xxx.xx. This is called a Motion to Incur Debt. Without this letter, there is no reason to submit your loan application.
• Some judges now require a purchase order or contract on a vehicle in order to authorize a motion to incur debt. In that case, we will print one on a random vehicle and guess high on payment and interest rate. The real payment can always be less, but the judges do not like having the payments end up higher than originally approved.
• Individuals must make at least $3000 per month to be considered for a Chapter 13 auto loan. Most people that are in a Chapter 13 earn more than that because if they did not, they would have filed a Chapter 7.
• In some cases, the lender will require that the plan be officially “confirmed” which may not happen until you are several months into the Chapter 13 repayment plan. Not all of our lenders require this, but some do.

Why would I be Declined for a Bankruptcy Auto Loan?

• Some reasons for being declined for a bankruptcy auto loan include:
• Unprovable income.
• Unacceptable income. Some lenders will not accept things like tips or overtime if you have not been on the job very long. Most lenders will not accept Unemployment, or other need based aid when considering an auto loan approval for you. Every lender has their own rules as to what they will or will not accept.
• Debt to income ratio is too high.
• Poor job history.
• No Positive credit history…ever. We need a leg to stand on when we help you get a bankruptcy auto loan. Without it, you will need a large down payment. Most of our bankruptcy auto loans are possible with no money down.

Hopefully this guide helps you understand bankruptcy auto loans. If you would like to know more, please contact WashingtonAutoCredit.com or apply for a bankrupcty auto loan.