Bankruptcy auto loans, after Chapter 7 or during Chapter 13
A bankruptcy doesn't stop you from applying. What changes is the paperwork: lenders usually want the discharge order after Chapter 7, and your trustee's or the court's approval during Chapter 13.
Where your case stands changes what you bring
General information, not legal advice. Check anything about your own case with your bankruptcy attorney or trustee.
Chapter 7, discharged
The discharge ends your personal liability for most debts in the case. U.S. Courts says it's usually entered 60 to 90 days after the first date set for the meeting of creditors.
- The discharge order (a copy is fine)
- Your case number
- Proof of the income you have now
Chapter 7, still open
Until the discharge is entered, talk with your attorney before you sign for any new credit.
- Your attorney's name and phone number
- Your case number
- Anything your attorney gives you in writing
Chapter 13, plan running
You generally can't take on new debt without the trustee's or the court's approval, because more debt can threaten your ability to finish the plan.
- The trustee's or the court's approval, in writing
- Contact details for your attorney and trustee
- A written vehicle price, if your attorney asks for one
Chapter 13, completed
Making every plan payment, and meeting the court's other requirements, leads to a Chapter 13 discharge.
- The Chapter 13 discharge order
- Recent pay stubs or benefits letters
Washington has two bankruptcy courts
Federal law splits the state into an Eastern and a Western District (28 U.S.C. 128). Moses Lake (Grant County) and the Yakima area (Yakima County) are in the Eastern District. Auburn (King County), Longview (Cowlitz County) and Washougal (Clark County) are in the Western District. Your case stays with the court where it was filed.
Lenders have their own reason to ask for approval during Chapter 13. Under 11 U.S.C. 1305(c), a lender's claim for consumer debt taken on during the plan can be disallowed if it knew, or should have known, that getting the trustee's approval first was practicable and it wasn't obtained.
Western District
Once a Chapter 13 plan is confirmed, Local Bankruptcy Rule 3015-2 lets you send a written request straight to the trustee for permission to finance a vehicle. If the trustee approves, no separate court order is needed. If not, you can still ask the court by motion.
Eastern District
Local Bankruptcy Rule 2083-1 calls for a Notice of Intent to Incur Post Petition Debt, filed with an updated statement of income and expenses. The court decides the request if anyone objects.
Your attorney or the trustee's office handles those filings. If they need details on the vehicle, the dealership's finance team can put the vehicle and its price in writing.
Getting ready
None of this replaces your attorney's advice. It helps a lender see the whole picture.
Find your court papers
The discharge order for a finished case, or the written approval for new debt in an open Chapter 13 case. If you can't find the discharge order, ask your attorney for a copy.
Read your credit reports
Check all three for free at AnnualCreditReport.com and see how the accounts from your case are listed. Federal law lets a bankruptcy be reported for up to 10 years, counted from when the case started (15 U.S.C. 1681c).
Write down all of your income
Benefits, part-time pay, a pension and self-employment can all go on the application, listed as they really are. Regulation B bars a lender from writing off income just because it's part-time, a pension or public assistance; the lender still decides how much of it to count.
Keep the loan in line with your budget
A lower price, cash down or a trade-in all shrink what you borrow. During Chapter 13, the trustee or the court will want to know the new payment won't put the plan at risk.
Apply when you're ready to buy
Credit checks from auto lenders generally count as a single inquiry if they all land in the same 14 to 45 day stretch (CFPB), so keep your shopping to a few weeks.
How a lender reads a bankruptcy
The bankruptcy is one line in a bigger file. The CFPB's list of what lenders weigh also takes in what you earn and owe, how much you borrow and for how long, how your down payment compares with the vehicle's value, and what kind of vehicle you're buying.
All credit types are welcome to apply, and there's no single waiting period after a discharge: each lender sets its own rules. Our finance teams ask about your case first, so your application goes to lenders that consider applicants with a bankruptcy on file.
Because our dealerships send a lot of applications to the same lenders, our finance teams can tell you before you visit which papers those lenders have been asking for on bankruptcy files. They can't promise how a lender will decide, and approval is never guaranteed.
Get your Fresh Start plan
Tell us where your case stands and pick your dealership. Its finance team will tell you which papers to bring. If your Chapter 13 plan is still open, talk with your attorney or trustee too.
- Pick your town, then the dealership
- No Social Security number asked
- The dealership's finance team follows up with you
This isn't a credit application. When you apply, lenders check your credit and each lender decides. Approval is never guaranteed.
Questions people ask
Can I get a car loan after a Chapter 7 discharge?
You can apply once the court has entered the discharge. Bring a copy of the order. Whether to lend after a bankruptcy, and on what terms, is each lender's decision.
Can I buy a car in the middle of a Chapter 13 plan?
It can be done with your trustee in the loop. U.S. Courts tells Chapter 13 filers not to take on new debt without talking to the trustee first, and lenders generally want the trustee's or the court's approval before they fund the loan. Your attorney knows your district's steps.
How long after a bankruptcy can I get a car loan?
It depends on the lender, since each one sets its own rules. Credit reports can carry a bankruptcy for up to 10 years, so expect a lender to ask about it no matter how long it's been.
Will a franchise dealer work with me after bankruptcy?
Ours will take your application. Our 14 dealerships work with buyers who have a discharged case or an open Chapter 13, and send applications to lenders that consider applicants with a bankruptcy on file. Each lender decides, and approval is never guaranteed.
What if my Chapter 7 hasn't been discharged yet?
Check with your bankruptcy attorney first. Signing for a new loan while the case is still open is a question for them. Once the discharge is entered, bring the order with you.
Is the Fresh Start Finance Program part of my bankruptcy case?
No. Bankruptcy law talks about giving people a fresh start, but our Fresh Start Finance Program is simply Bud Clary Auto Group's name for how our finance teams handle applications from people whose credit has taken a hit. It plays no role in your case and doesn't replace your attorney's advice.
Case papers ready?
Answer a few questions, pick your dealership, and its finance team takes it from there.