Bankruptcy is a legal proceeding where an individual formally declares that they are unable to repay their debts. Sometimes the debts are completely discharged and the individual doesn’t have to repay them at all. But they can also be reorganized so that the individual is more able to pay them over a longer period of time. Overall, bankruptcy has serious long term consequences for the consumer. It is an official proceeding that requires a court to approve your bankruptcy claim. In the end, it is very difficult to repair credit and obtain financing for necessary large purchases after filing for bankruptcy.
What Are the Different Kinds of Bankruptcy?
Chapter 7 bankruptcy involves a kind of liquidation of a person’s assets. A court will determine how much they can pay back their debts. A chapter 7 bankruptcy proceeding will involve tallying the value of a person’s possessions, and in some cases selling them off to help pay debts. Once the debtor pays off as much of the debt as possible, Chapter 7 discharges most consumer debt. It does not, however, discharge some common debts, such as:
Chapter 13 bankruptcy doesn’t discharge debt, but it reorganizes the repayment of the debts. It grants the consumer time to work out agreeable repayment plans with the creditors that are holding the debt.
Can I Get a Car Loan if I Have Filed for Bankruptcy?
It is very difficult to obtain loans after bankruptcy filings, but it is not impossible. But, it takes time. It is important to re-establish your credit by making on-time complete payments on any open accounts, so choosing an affordable car is key.
Ultimately, the kind of bankruptcy you filed, can affect the outcome of the car loan. It seems like a chapter 13 bankruptcy would help you re-establish credit faster since you are still paying off some debts rather than discharging them all, but that’s not always the case.
Why? Chapter 7 provides a clean slate, so it might be easier for a person to make timely on time payments of new debt. Whereas chapter 13 requires paying back as much as you can in a reorganized payment plan, so it might be difficult for someone with debts that became too much to handle. If they still have trouble making their payments, they might have a hard time re-establishing new credit, which leads to a harder time getting a new car loan.
Do I Need a Lawyer?
Yes. A bankruptcy lawyer is needed to file for bankruptcy. Your lawyer can advise you on best way to re-establish credit in order to get a car loan after bankruptcy proceedings.