#bankruptcy auto loans
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People in the midst of bankruptcy often find they have no choice but to accept exorbitant interest rates charged by bankruptcy auto lenders. Federal courts will allow people who are completing a bankruptcy to take on new debt with permission of the bankruptcy judge. This happens in Chapter 13 bankruptcies, which take three to five years to complete. Requests to take on auto loans are not common in Chapter 7, another form of bankruptcy. Chapter 7 is a much shorter process than Chapter 13 and requires just months to complete.
Finding a Lender
Bankruptcy auto lenders usually are not traditional banks and credit unions. Usually they are specialty loan companies available through dealerships. The dealers range from large new-car dealerships to small used-car lots. They all have have connections with bankruptcy auto lenders locally and nationwide.
Bankruptcy auto lenders should be avoided if at all possible. The interest rates are expensive, and dealers may offer loan approval only on cars that are overpriced and have mechanical defects. Waiting until after bankruptcy and rebuilding your credit can lead to a much better loan.
MSN Money recommends that people begin working on their credit as soon as their bankruptcy is completed, or discharged. Bankruptcy information remains on as credit report for 10 years, but that is offset somewhat by all unsecured debt being eliminated through the bankruptcy. That positions you for a fresh start including possible approvals on department store cards, gas cards and secured credit cards. Secured credit cards require you to place money into a bank savings account, which is held as collateral with the amount becoming your credit line. Credit scores can be improved by making small charges on new credit accounts and paying the balance off each month. It is important to make all payments on time as you rebuild credit over 12 to 24 months. MSN Money reports that it is possible to emerge from bankruptcy and build a credit score in the 700s within two or three years. Credit scores in that range will qualify you for financing much less expensive than loans offered by bankruptcy auto lenders.