Auto Loans and Bankruptcy

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What is a Bankruptcy?

 Bankruptcy is a complex legal process in which a person can seek relief from their debt. Chapter 7 also known as “straight bankruptcy” often sees the liquidation (selling) of assets to pay a debtor. Alternatively, Chapter 11 leads to a negotiated payment plan with debtors. While bankruptcy may be the only way out for some, it will have lasting effects on your credit.

What is Chapter 7 Bankruptcy?

Chapter 7 provides relief to debtors regardless of the amount of debt owed or whether a debtor is solvent or insolvent. A Chapter 7 Trustee is appointed to convert the debtor's assets into cash for distribution among creditors

What is Chapter 11 Bankruptcy?

frequently referred to as a "reorganization" bankruptcy. Usually, the debtor remains “in possession,” has the powers and duties of a trustee, may continue to operate its business, and may, with court approval, borrow new money.

How To File For Bankruptcy

Bankruptcy is most often considered a last resort. Bankruptcy can be filed by an individual, spouses together, or by any corporation or legal entity. All cases of bankruptcy are an issue of a federal court and are regulated under U.S. Bankruptcy Code.

Bankruptcy is generally filed by businesses or individuals when they have more debt than they can afford to pay for and see no way to catch up.

Bankruptcy Process Overview: 

Bankruptcies start when a debtor files a petition to the bankruptcy court. 

Step One: Compile a list of all financial records including debts, expenses, assets, and income.

 

Step Two: Credit counseling You must complete court-mandated bankruptcy counseling within 180 days before officially filing for bankruptcy. 

Step Three: Hire Legal Representation- While not technically required it is not recommended to attempt and represent yourself in bankruptcy court.

Step Four: File your Petition

Step Five: Meet with creditors
 

What Happens After Bankruptcy?

When your vehicle is subject to repossession is dependent on the specific agreement you made with the lender and or dealership. In some instances, lenders may attempt repossession immediately after a missed payment, while others allow for more grace and alternative routes.

In Ohio for example, the average number of days before a car gets repossessed after default payments is around 70. This is, however simply a statistical average and

Bankruptcy & Your Credit

-Bankruptcy will most certainly have a negative impact on your credit score but the effects can vary based on a number of factors such as the state of your credit before bankruptcy and the number of accounts closed. Bankruptcy can be a powerful financial tool for those who need it, but recovering from its effects on your credit can often feel like an uphill battle.

 

How Long is Bankruptcy On Your Credit?

 

Getting Your Credit Score

Many sites and services offer to give you a FICO credit score, but in order to get your full report, you will need to contact one of the three major reporting bureaus: TransUnion, Experian, and Equifax. Each individual is entitled to one report from the three credit bureaus every year. Click here to learn how to get your free credit score.

Getting your credit report can help prepare you for what to expect at the dealer and help you understand how bankruptcy has affected your credit. If you already have your credit report you can learn how to read it here.

Auto Loans After Bankruptcy

Bankruptcy shouldn't stop you from striving for financial wellness. There are now several options for those who have filed for bankruptcy to get approved.  You may qualify for in-house financing, special financing, and credit amnesty programs may.  To find a dealer near you that offers Bankruptcy auto financing you can get prequalified online with our 3-minute application.

 

In-House Financing

 

If you can not get approved through a traditional lender, or the interest rate is too high, a buy-here-pay-here lot may be a good option. Some auto dealers have their own in-house financing and do not require third-party approvals from banks in order to offer you a loan. This can be a great way for someone with less than perfect credit to get a vehicle and get re-established.

 

Some buy-here, pay-here lots report to credit bureaus, however, some will not require a credit check at all and may simply verify your residency and income. BHPH lots may also require a down payment however, they are often more manageable than traditional bank loans.

How Soon Can You Buy A Car?

-Bankruptcy will most certainly have a negative impact on your credit score but the effects can vary based on a number of factors such as the state of your credit before bankruptcy and the number of accounts closed. Bankruptcy can be a powerful financial tool for those who need it, but recovering from its effects on your credit can often feel like an uphill battle.

Are Auto Loans Forgiven in Bankruptcy?

-Bankruptcy will most certainly have a negative impact on your credit score but the effects can vary based on a number of factors such as the state of your credit before bankruptcy and the number of accounts closed. Bankruptcy can be a powerful financial tool for those who need it, but recovering from its effects on your credit can often feel like an uphill battle.
 

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