Ask The Expert: How Do I Get My Paycheck Back?

Question: I am buried in payday loans. They are eating my paycheck, and I’m falling behind on everything else. What steps should I take to get my paycheck back?

— Pat in Illinois

Steve Rhode answers…

We need to take a step back and look at this situation with a wider lens. While you’re currently reacting to the payday loan issue; and the paycheck hassle it is creating for you — it’s just a sign. You probably have bigger financial problems brewing.

For example, I suspect you have no emergency fund or savings account to use if something else needed your financial attention. One more unexpected financial surprise would be unsustainable for you. You’re currently struggling with a past payday loan, and the payday lenders are typically the lenders of last resort, along with pawn shops.

And you’ve already said you have multiple payday loans, so the odds are you are well buried already.

Frankly, the logical solution at this point would be for you to talk to a bankruptcy attorney. Get a free consultation to discuss your situation. You’re legally entitled to a fresh start, and a consumer bankruptcy will terminate all of your payday loans — and give you a chance to do better moving forward.

Steve Rhode is better known as the Get Out of Debt Guy.

Ask The Expert: Can I Just Stop My Car Payments And Buy Another Car?

Question: I’m upside down on my car — about $14,000. Someone told me the best thing I could do is to let it go back to the dealer, then buy another car. They said it would not hurt my credit if I kept my payments up for a year. Is that true?

— Cynthia in North Carolina

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fast

Questions like these are difficult to answer — but not because they’re complex. The solution to this specific problem is actually quite simple: Don’t do it, Cynthia.

What’s complicated are the circumstances that led up to this awful situation. In my experience, Cynthia’s problems started long before she owed more on her car than it was worth. She likely has other debts that prevent her from making her monthly payments.

I was discussing this with Steve Rhode, better known as the Get Out of Debt Guy. Steve is a debt celebrity because he was once broke himself and educated his way back to financial independence. I asked him about Cynthia, since he was once in the same situation. Here’s what he said…

Steve Rhode’s take on Cynthia

The worst thing you can do at this time is to make any decisions based on your credit score. We need to think more long term and understand what a credit score really is. Your credit score is an indication of your risk to future lenders and not how smartly or wisely you are managing your money. Let’s start thinking smart.

I would suspect that if you are $14,000 upside down on the car you now want to trade-in or give back that there are other financial concerns as well. Maybe you previously traded a car in and rolled in some negative equity in the past.

One option here if the car is in good shape and treating you well is to just stick with it, pay the loan off eventually, and get the use out of the car. Modern cars are much more reliable and getting many trusty years out of a vehicle that is regularly maintained is quite possible.

I would absolutely avoid getting yourself in a situation to just default on the car and lose it to a voluntary or forced repossession. You’ll get hit with a huge bill after the repoed car is sold at auction.

But if this is the sign of a greater financial struggle then one logical consideration is to think about cleaning the slate and pursue a Chapter 7 bankruptcy. You can give the car back and shed the $14,000 of negative equity. This will give you the legal fresh start that citizens are entitled to when in bad situations.

Your debt will be eliminated in about 90 days and then you just need to get to work rebuilding your credit, which is actually easy to do.

Immediately after bankruptcy you could do what a lot of people have done, even me, and buy a cheap beater car. During the next six months you can focus on rebuilding your credit and then you should be ready to go talk to one of the major car manufacturer dealers and discuss their internal financing offers. Before you talk to a sales person, talk to their financing office.

The fact you dealt with your debt in bankruptcy will most likely free up money each month you can save towards the down payment on your new car. The bigger the down payment, the lower the lender risk is, and the better terms you will get.

When you buy the new car after six months of driving the beater, your interest rate is going to be higher but that can be offset by looking for a much more fuel efficient vehicle that allows you to lower your monthly fuel bills. Additionally, after another 12-18 months you could even look at refinancing the vehicle at a lower interest rate. Refinancing of used cars is possible.

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Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Buy a Home after Bankruptcy

Build the right strategy for mortgage approval.

Make a plan to invest in a home

The negative credit impact of bankruptcy stays with you for years after the date of final discharge – up to ten years, to be specific. But that doesn’t mean that you have to put your life on hold for the next decade.

In fact, with the right strategy you can even qualify for one of the toughest types of financing to get approved for… a mortgage.  So you can get a new home that meets your needs and works for your budget, too.

The information below can help you craft the right strategy to get your credit and outlook ready for mortgage approval.  If you have questions or need to connect with the credit services described, we can help. Call us or complete the form to the right to tell us what kind of assistance you need.

Step 1: Set a date

The first step to get ready for a mortgage after bankruptcy is to determine exactly how soon you want to buy. Ideally, you need about one to two years to build credit and prepare your finances for loan approval. Given new lending standards required following the real estate market collapse in 2009, you may find it downright impossible to qualify if you don’t give yourself that time and do the work described below.

That being said, you may have a need to move sooner. If the bankruptcy filing put an automatic stay on the foreclosure of your home, you may need to sell the property quickly and downsize. In this case, instead of immediately pursuing a new mortgage, the best option may be to find a rental property for a few years so you can really get ready to buy.

Step 2: Review & repair your credit

Following severe financial distress that leads to bankruptcy, your credit profile may contain a large number of negative items – both correct and incorrect. Completing a bankruptcy should discharge the remaining balances on your debts, balances should be zeroed out and collection accounts should be closed.

With that in mind, you need to review your credit report to make sure everything has been updated correctly following the completion of your filing. If you find items that you think are outdated or need to be removed, then you should consider going through the credit repair process.

Step 3: Take steps to build credit

You can offset negative information in your credit report that can drag down your credit score by taking positive actions for your credit. This means that following bankruptcy, you can take steps to rebuild your credit long before the bankruptcy penalty expires and the item gets removed from your profile.

The first step to rebuilding credit is usually to get a secured credit card. This allows you to get credit with a deposit, so your credit score isn’t really a factor to qualify. Then you make charges strategically and manage the debt closely. Every positive payment you make helps you build credit. You should also make an effort to maintain the balance at no more than 20% of the total credit line you have available.

In addition, make sure to keep up with payments on any other debts that you have. This includes student loan debt that doesn’t get discharged during bankruptcy, as well as the payment for any small personal loans you may wish to take out to help you rebuild your credit. Then you can move on to the steps that follow while you work to build your credit

Step 4: Set a budget & start saving

Financial stability will be key to getting from bankruptcy completion to mortgage approval, so you need to build a formalized budget if you want to be successful. And luckily, budgeting isn’t as much of a hassle as you might think.

Find a budgeting platform that makes it as easy as possible to build a budget. Once you have your accounts entered and expenses categorized – which should take less than an hour even if you get really detailed – you can see how much free cash flow you have available to save. Remember that you need as much money as possible for a down payment, so the more you can save each month for the next 12-24 months, the better.

Step 5: Maximize your down payment

Speaking of down payment, the more money you have for a down payment, the easier it usually is to qualify for the mortgage you want. Ideally, you want at least 20% of the purchase price of the home. This will allow you to qualify for a traditional mortgage, instead of depending on riskier options like ARMs.

Of course, bear in mind that you may be able to qualify for an FHA-loan for as little as 3% down. But your goal should be to hit the 20% mark in order to make it easier to qualify.

Step 6: The right home, the right price

Allow Steps 1-5 to work. You should be building credit by making strategic purchases and managing your debt closely. You should also be moving all free cash flow into savings to maximize your down payment. The more aggressive you are at doing these two things, the faster you can usually get to where you need to be.

After about 12 months of hard work, you can start the process of buying a home. But that doesn’t mean you get an agent as start making offers. You need to take a lot of time to define what you need in a home, where you want to live, and how much home your can afford. And make sure the amenities and home features you think you need are really things you can’t do without.

Use a mortgage calculator to figure out the size of mortgage you can get without struggling to make the monthly payments. This will help you set the right target price range.

Step 7: Check your credit score

The last step you should take before you start actively looking and making offers. Check your credit score. You can purchase one of your credit scores through a credit bureau or you can enroll in a credit monitoring service to get your scores from one or three bureaus.

Fact: In most cases your credit score needs to be around 650 at minimum to qualify for mortgage approval.

Remember, you usually won’t need this service forever (unless you want to keep it for your own peace of mind) so typically only need this for a few months while you make sure your score is as high as possible before you go to apply for a loan. Using this strategy, you can make sure your credit score is maximized, then go to a lender to get the mortgage pre-approval you need to make the search for your new home easier.

Is There Hope for Us In Bankruptcy?

Question: My wife and I have roughly $80,000 in credit card debt. We have 4 children, 2 in college and 2 yet to go. We own a small business that we run out of our home in addition to my being a teacher.

How much are we really going to lose through bankruptcy? We didn’t get into this situation by buying everything we’ve ever wanted! Most of it came from being in a smaller amount of debt and we’ve only ever had enough income to cover minimum payments, making no progress.

Five years ago, after searching for years for ways to try to increase our income, we bought a business that we thought would help do that. Our business is making money, but it took time to get to that point and in doing so, increased our debt significantly. My wife and I are now completely maxed out on credit cards and just about every bit of our income goes to covering minimum payments.

We struggle to have cash to buy groceries, gas, general necessities. We have avoided the thought of bankruptcy out of the fear of losing our home, our equipment for our business, the damage it would do to our children’s ability to get college loans. Can it really help us?


Steve Rhode answers…

Steve Rhode on how to get out of debt fastDear Casey,

I understand the fear and the uncertainty you have. It is absolutely understandable you are afraid or concerned.

You can solve money problems with an increase to your income; by reducing expenses, a combination of the both, or intervention. Bankruptcy is the only legal process that forces your creditors to have to deal with the debt. They eliminate it or establish a payment plan you can afford.

Bankruptcy is an option

Your situation is a good example of why the Federal Reserve Bank of New York says bankruptcy is better for consumers than financially limping along.

There are some important points in your situation that might impact the outcome. For example, is the business owned personally or in a corporate name?

You can resolve these question by meeting with a local bankruptcy attorney to discuss your particular situation. Most bankruptcy attorneys will meet with you for free to discuss your case.

Bankruptcy over business debts is a process companies follow every single day. Even major companies like American Airlines and Radio Shack have turned to bankruptcy as a way to reorganize their debts.

More people do than you’d think

Assuming this is all debt you personally owe there are two likely outcomes based on how your debt is structured and your income. One option is you will be able to file a chapter 7 bankruptcy, like 75 percent of consumers do. In that case your debt would be eliminated in about 90 days and you could get back to focusing on doing better moving forward.

If your chapter 7 bankruptcy is over then you are eligible again for federal student loans. But keep in mind, student loan debt is among the worst types of debt to have. Private student loan debt is a horrible problem for students.

The other option in bankruptcy would be a chapter 13 repayment plan where you would make payments over three to five years and at the end of that time any remaining balance due would be forgiven.

One big advantage of bankruptcy is that all the forgiven debt is not taxable as income. When a creditor forgives or writes off a bad debt you may owe tax on that forgiven debt if you are not insolvent.

But the bottom line is something is going to have to change here. It is very unsafe to live on such a narrow financial ledge. You need to take action that will get you back saving for retirement, living within your income, and setting aside money for emergencies.

Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.

What’s the Secret to Getting Out of Debt?

Question: My husband and I have been just breaking even for some time now,  trying to dig ourselves out of debt and save money. We’ve cut everything to the minimum and constantly tell our kids to do without. I can’t even afford for them to go to a friend’s birthday party or participate in a school event.

I feel like such a failure because I can’t do more for my kids. My husband and I seem to be fighting more about money these days. What is the secret to getting out of debt?

— Susan

Steve Rhode answers…

Steve Rhode on how to get out of debt fastDear Susan,

I can certainly understand how the struggle to deal with debt can feel like a long, grinding journey in your life.

The reality is that getting out of debt doesn’t follow textbook advice. The formula is quite simple — just adjust your life to spend less than you make after your expenses. It would also be wise to include regular savings and retirement savings as part of those mandatory expenses.

Creditors won’t often let you pay what you can realistically afford. I’ve seen far too many people tumble back into money troubles because they used all available funds to pay down debt but had to use credit again to pay for an unexpected emergency, like car trouble or an unexpected home repair, because they had no savings.

Dealing with debt is complicated because it is more about perceptions and emotions than it is about math. In fact there is an entire intellectual field of study about the illogical actions we take when it comes to dealing with money. It’s called behavioral economics.

I have always found it interesting that tactics like leaving a faint cookie smell in dressing rooms causes stores to sell more sweaters in the fall. However, a more perplexing group mentality is why people in financial trouble spend so much time trying to repair the past rather than addressing the real demands of making sure they are prepared for tomorrow.

There are entire industries which exist to persuade people that getting angry about their debt, and spending the next few years repaying it, is the moral thing to do. While repayment works for some people, for countless others, it just does not make mathematical sense and leaves them significantly more exposed to a worse financial future. Keep reading; just because that statement seems counter-intuitive does not make it wrong.

So Susan, ultimately the best way for you to get out of debt is going to be for you and your husband to take a deep breath and spend some time in contemplative introspection. Ask yourselves if you have a greater financial responsibility to your future old, unemployed, and potentially sick 80-year-old selves, or to abandon logic and set yourself up for significant risk by just breaking even each month on your current path without getting ahead or saving for the future.

If you decide your financial future is more important than the past then we need to look at altering your current equation. You will either need to reliably and consistently increase your income, reduce your expenses, or do a combination of both.

If you can increase your income to a point where you can take advantage of the maximum retirement and matching contribution your employer may provide, save money each month in an emergency fund and reduce your debt, then maybe that’s worth considering.

If that’s not a realistic option then maybe it is time to look at debt intervention through the only solution that gives you legal power over your creditors: bankruptcy.

Sometimes the decision for people really comes down to whether they feel doing without and living a dangerous financial life for years is more moral than setting themselves up for future financial success. Often math and logic are at odds with emotional comfort and assumptions.

Only you can decide how you want to tackle your debt. I hope that you make that choice based on reality, not assumptions about what makes the most sense as told to you by others.

Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.

I Can’t Pay My Bills. What Can I Do?

Question: I’m so completely freaked out about my bills. I’m now so in debt and worried about it I can’t sleep, I’m depressed, and all my wife and I do is fight about money. I’m constantly telling my kids they can’t participate in any school events because I can’t afford it.

My life is hopeless.

— Jimmy

Steve Rhode answers…

Steve Rhode on how to get out of debt fastJimmy, it is very common for people to allow money troubles to ruin their lives. In a survey I conducted years ago nine out of ten debtors felt some stress over their debts and 70 percent said they think about their debts often.

Being worried to the point of finding yourself very depressed  is a common occurrence for four out of ten debtors. The reality is we create our own negative emotions surrounding our money problems.

In all of my decades of helping people with financial advice I’ve run into very few people who didn’t wind up in deep trouble because of forces outside of their control. Take the bankrupt farmer whose crop didn’t come in because of an unexpected drought. Does the lack of rain make him reckless?

As individuals we worry so much about what other people are going to think of us for having debt problems. The reality is the majority of people don’t think about you that much.

Frankly, the biggest mistake I see people making is not considering bankruptcy early enough to exercise their legal right to get a fresh financial start. Recent data out from the Federal Reserve Bank of New York shows those who decide to file bankruptcy find their credit rebuilt and their credit score significantly rebound much faster than those that linger in problem debt for years. People are shocked to learn that they will begin getting offers of credit following their bankruptcy.

Even more importantly, these days I worry more about people who struggle and limp by trying to dig out of a bad financial spot because they feel their first commitment is to their creditors. They completely overlook their commitment to their future retired selves.

Money saved today in a qualified retirement plan can grow tax-free and be worth hundreds of thousands of dollars in retirement. Money that you will need when you are no longer able to earn money and you are old and unable to work. And let’s not forget, if your employer matches the money, you save you are throwing away free retirement money by not saving your contribution.

So while you might feel guilty about your current situation because you are living through it right now, how will you feel when you are 82 and struggling to get by depending on a fragile Social Security system to keep you warm and dry? More than four out of ten people admit they have no money saved for retirement. Do you want to be one of them?

If we are talking about responsibility here, whom do you have a greater responsibility to serve: your creditors or your future self?

Bankruptcy allows people to rearrange their finances to fit within their income. That adjustment can allow you to get back to retirement savings. What people always seem to overlook is that there is nothing that prevents people from repaying their creditors if they want, following bankruptcy.

Rather than find yourself stuck in regret and hopelessness, you owe it to yourself and those you love to talk to a local bankruptcy attorney and find out what bankruptcy would mean for you.

Dealing with the problem debt will allow you to close the door on the problem situation and help you to move forward in a constructive and hopeful way.

I find it so ironic that companies file for bankruptcy protection and their stock increases. Investors view bankruptcy as a logical and proactive step to reorganize a bad financial situation; yet individuals think it is wrong, against their religion, or immoral. In fact, you might be very interested in what the Bible actually says about bankruptcy. See this article.

Don’t believe everything you assume about bankruptcy. In fact, between 2006 and 2011 nearly 500 churches and faith-based groups filed bankruptcy. And currently there are about 90 more filing for legal financial protection each year.


Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.

What Do Charles Schwab, Bill Gates, and Donald Trump Have In Common?

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Question: You always answer such heavy-duty questions, I wanted to ask you something for fun. Do you know what Charles Schwab, Bill Gates, and Donald Trump have in common? Let’s see how smart you are!

— Wendy in Deleware

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fastOK, Wendy. Let’s see how smart I am!

Without using Google, I first guessed that all three of these business leaders were broke at some point in their lives. When I did some research, I found out it was much worse than that.

While many famous people go bankrupt and claw their way back — steel magnate Charles M. Schwab lived fast and died broke. He had at least one child out of wedlock, gambled notoriously, and spent lavishly. He’s estimated to have spent up to $40 million (almost $800 million in today’s dollars) on himself. He died penniless in 1939.

While the depths of his spending surprised me — he apparently built a 44-room summer estate and then decided to move the entire thing 200 feet — it’s just an extreme version of what I see too often. As the economy recovers, I expect to witness many Americans spending their new wealth as soon as they accumulate it. If there’s a lesson here, it’s to always spend wisely.

I’m not being a killjoy, either. I’m quite sure Charles Schwab’s lifestyle and enjoyment of life weren’t significantly improved paying for his summer house to be put on rollers and moved less than a football field away.

By the way, don’t confuse Charles M. Schwab with the Charles Schwab who founded the investment firm Charles Schwab Corporation. His is a success story, overcoming dyslexia and flunking English twice in school to become a billionaire.


As for Donald Trump, that’s a story many people already know. The Donald has declared bankruptcy four times and is still a billionaire. What many people don’t know is that he’s never declared personal bankruptcy. Instead, he’s filed for corporate bankruptcy. Forbes described the differences, and Trump’s up-and-down investments, in an excellent article called How Donald Trump Made Bankruptcy Work For Him.

(If you want bankruptcy to work for you, check out our Education Center’s bankruptcy section. Often, there are other less-severe solutions to your money problems.)

How does Bill Gates fit into this scheme? The world’s richest man dropped out of Harvard and failed at his first shot at computer fame. His business partner in that venture was Paul Allen, who later made his fortune with Gates at Microsoft. But as Allen recounted to Newsweek, the two men launched Traf-O-Data, which attempted to compile traffic-flow patterns for traffic engineers.

It failed, but it led Gates to say, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

Thanks for the question, Wendy. Hope I passed!

Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

Ask the expert: Do bankruptcy and credit card debt mix?

Question: In 1997, I declared bankruptcy after a terrible divorce. I was doing fine until I got laid off a few years ago. My problem is, when I’m under stress, I like shopping therapy. It never really works but I keep doing anyway.

Even though I have a wonderful new job, it doesn’t pay what my old one did, and I have more than $20,000 on various credit cards. I’m getting angry calls from debt collectors, and the stress is making me lose my hair — literally!

So I’m considering bankruptcy again. I hear the law has changed, but it’s hard to figure it out by searching the Internet. Can you give me some advice?

— Vanessa in Tennessee

Howard Dvorkin CPA answers…

Howard Dvorkin on how to get out of debt fastMore so than any other financial topic, bankruptcy is both complicated and depressing. Think about it: Mortgages are also complex, but after you navigate the process, you own a house!

Bankruptcy, however, is simply a “fresh start,” says the federal government. Unfortunately, the government’s explanation of the process isn’t exactly user-friendly — it’s called “Bankruptcy Basics,” but it looks like this. Not very basic, is it?

So here are three crucial things to know, Vanessa…

1. Chapter and verse

Most people only ever hear about two kinds of bankruptcy, although there are more: Chapter 7 and Chapter 13.

The former is much more popular — about twice as many Americans filed Chapter 7 than Chapter 13. Why? Because Chapter 7 is called “liquidation.” Essentially, your assets are sold off to pay whatever debts can be covered. The rest of your debts are forgiven.

Meanwhile, Chapter 13 is often called “debt adjustment.” Why? Because a bankruptcy judge creates a plan for you to pay back your debts. Now, I know what you’re thinking: “Why would I choose to pay something back if I can simply walk away debt-free?”

Like everything else in bankruptcy, the answer is: It depends. For example, under Chapter 13, you can keep all your property. Don’t have any? Then Chapter 7 is probably best.

2. What a “means test” means

When you sought bankruptcy protection, Vanessa, the law was different. That was before 2005, when Congress created something called a means test. Basically, someone else — appointed by the bankruptcy court — studies your financial situation and decides if you even qualify for Chapter 7 or 13.

Bottom line: It’s indeed harder to declare bankruptcy today than it was before 2005.

3. There’s good news

While the government has made bankruptcy more complicated than it once was, the private sector has stepped in to make it easier. has partnered with some of these experts, and you can ask them by calling at (855) 996-9768.

Also, I don’t want to end my reply without addressing something you said in passing. While we talked a lot about bankruptcy law, there’s another called the FDCPA — short for Fair Debt Collection Practices Act. It protects you from harassing debt collectors. I urge you to read about that in’s Collector Harassment section, where you can also sign up for help in ending any harassment you’re facing.

Finally, Vanessa, also offers all sorts of free advice on controlling your spending. I hope you’ll click around the site — and I hope you’ll find some other hobby than shopping!


Have a debt question?

Email your question to and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.

How to Buy a Car After Bankruptcy

The secrets to buying a car after bankruptcy.

Declaring bankruptcy doesn’t have to put the breaks on buying yourself a car. You don’t have to wait 7 to 10 years, either. While you rebuild your credit score, using techniques can teach you, there are three options you can explore.

First, consult your own bank or credit union. If you’ve done business with them for a while, a bankruptcy isn’t a death sentence. They’ve known you for a long time and they’ll work with you. Second, you can try bad credit auto lenders. They’ll charge you more, but they are a legitimate way to get a new set of wheels.

Third, look into swap leasing. That’s the fancy way of saying you took over someone’s lease. Just be careful and read the terms and conditions and make sure you’re not getting hit with extra fees. There’s a lot more you can do. Check our for those tips and more. can literally put you on the road to financial freedom.

Buying a car after bankruptcy is easier than you think, even if your credit hasn’t fully recovered.

You might think that making a major car purchase immediately after a bankruptcy filing is impossible. While it’s true you may not head out the next day to get a new set of wheels, you also don’t need to wait the 7-10 years. Although bankruptcy will still show up on your credit that long, the “weight” of the penalty decreases over time. What’s more, you can offset the damage of that penalty by taking certain actions now. So, buying a car after bankruptcy is possible, even within six months of your final discharge date.

Once your bankruptcy is complete, you’ll want to take steps to rebuild your credit before you start making major purchases. In an ideal world, you can recover to a good credit score before you start taking out big loans like a new auto loan or a mortgage. However, if you need a car to get to work and get things done, then you may not have time to wait around.

Fact: In general, steps you take to rebuild your credit take about 6 months before you start to see a positive impact on your score.

So here is what you can do to get on the road quickly…

Before you buy

First, you need to take steps to bump up your credit score as much as possible before you apply for your new loan. If you don’t have time to wait so you can take some steps to boost your score, then you at least need to make sure mistakes on your credit report aren’t making your credit score even worse than it needs to be.

So at a bare minimum, takes steps to repair your credit. If you have the means, a credit repair service is almost always a better option than trying to do DIY credit repair on your own. You save time and are more like to be successful than if you try to do it on your own.

Need to repair your credit fast? Connect with a state-licensed attorney to get professional credit repair help now!

Repair Your Credit

This helps you to maximize your credit score as much as possible before you apply for a loan. Remember, better credit not only means that it’s easier to get approved. You also get a better interest rate, which means less interest paid over the life of your loan.

Getting the right auto loan for your finances

Directly after your bankruptcy, most lenders won’t even consider lending to you for something as big as an auto loan (although they’re more flexible on auto loans than they would be for a mortgage). But just because lenders are wary of you, it doesn’t mean that you can’t get financing anywhere. You just have to look into options that are specifically tailored to people in your situation.

Here are some of the places you’ll want to look first:

  1. Your own bank or credit union. If you are a standing customer at a bank or (even better) a credit union, then you may be able to get financing options directly from your main financial institution. They may be more willing to work with you, because all of your accounts are with them.
  2. Bad credit auto lenders. Look into auto lending companies that specialize in working with customers who have bad credit. These companies aren’t scams – they just are willing to take more of a risk and may charge you more to borrow. But even a “bad credit auto loan” can be a good deal as long as it works for your budget. Make sure when you’re searching online that you’re looking specifically at auto lenders.
  3. Swap leasing. This is basically where you take on someone else’s lease and take over the payments from them. You only have to pay what’s left on the auto and they get out of a loan that isn’t working for them for whatever reason. Just make sure to read all terms carefully and have the vehicle checked out prior to the exchange to ensure you’re not getting stuck with a lemon.

Tips for getting the best terms possible

The last thing you want to do when you just get out of bankruptcy is to take out a loan that’s bad for the budget. Putting your finances into a tailspin just to get a car is a recipe for disaster. So, you need to take as many steps as you can to get the best terms possible.

These tips can help you get better terms on your loan, for lower monthly payments and less interest paid over the life of your loan.

  • Make a bigger down payment. This decreases the size of the loan you have to take out so you can enjoy better terms on your loan with lower monthly payments.
  • Find a cosigner with excellent credit. Their awesome credit will offset you awful credit, so you can qualify for a better loan at a lower interest rate.
  • Watch out for hidden fees & add-ons. These elusive and expensive extras are even more common on loans for people with bad credit. If you have to apply for a bad credit auto loan, make sure the lender isn’t trying to bump up their profits with a lot of add-ons you don’t need.
  • Avoid anything that’s “contingent,” “adjustable,” or “conditional.” Loans that have fixed payments over their entire life are extremely easy to manage. But any variable that can change your payment schedule down the road is a big risk. Only get a loan that’s going to stay at the current terms until you pay it off.
  • Don’t buy more car than you can afford. If you’re extending the term of your loan anywhere beyond 5 years because you can’t afford the payments otherwise, then you’re probably buying more car than you can afford on your current budget. Downsize or scale back until you can increase your income or improve your financial situation more.

 More Questions about Buying a Car After Bankruptcy

Can you buy a car after bankruptcy discharge?



Yes, but there are definitely some steps you want to take first. Ideally, you should wait about 30 days after your final discharge date. Then, go to to download your credit reports for free from the three U.S. credit bureaus. Check to make sure that all your accounts are closed and show as paid. The bankruptcy should show up in the public records section of your credit report.

If the accounts included in your filing are not all up-to-date, then you need to go through credit repair to correct all of the linger negative information. This will ensure you have the best credit possible when you apply for a new loan or lease.

Can I buy a car while in Chapter 13 bankruptcy or Chapter 7 bankruptcy?



It’s unlikely you would be able to buy a car during Chapter 7 bankruptcy. This type of filing has a much shorter timeline that you can complete in as little as 6 months. Your credit is frozen when you file for bankruptcy with an automatic stay. The automatic stay means that collectors can’t pursue you and you don’t need to worry about repossession. However, it also means you can’t take on new debt without permission from the court. As such, you usually must wait until final discharge before you can take on new debt.

Now, Chapter 13 bankruptcy is slightly different. This filing can take up to 5 years to complete the court-ordered repayment plan. So, you might get into a situation where you need a car. In this case, you must contact your court-appointed trustee to get permission. As long as you show that the purchase is necessary and within reason, they may grant your request.

How long after bankruptcy can I buy a car?



As long as you’ve received the final discharge from the court there is technically nothing that prevents you from getting a loan. If you can find a lender that’s willing to loan to you with a subprime credit score, then you can get a loan the day after your court-appointed trustee releases you.

That being said, just because you can buy a car, it doesn’t mean you should. Ideally, you should at least repair your credit first. You should check your credit reports to make sure all the accounts included in your bankruptcy are closed. Otherwise, you may face even more credit score damage than just the bankruptcy. Credit repair takes about 30 days to complete. So, at the least, you should wait a month and repair your credit before you apply for a new auto loan.

Ideally, you should at least wait about six months before you apply for an auto loan. That gives you time to repair your credit and rebuild credit, too. You make payments on any loans you have left to build a positive credit history. If possible, you can get a secured credit card to build more credit history faster. Since credit history is the biggest factor used to calculate your credit score, six months of payments can really help to boost your score. As a result, you’ll get a better interest rate and better terms on the loan.

Should I buy a car before or after bankruptcy?



This really depends on your financial situation and needs. Taking on debt just before you file for bankruptcy is usually not good. The courts will look at debts taken on just before you file to see if you’re trying to commit bankruptcy fraud. That’s when you run up debt and then file for bankruptcy to get out of paying it back. Of course, just because you take on debt right before you file, it doesn’t automatically indicate fraud. If you need a car to get to work and handle your day-to-day life, then it won’t be a problem.

Another consideration is how much car you buy and how you file. If you file for Chapter 7 bankruptcy, then the court liquidates your assets in exchange for discharging your debt. Vehicles are protected up to a certain equity value. So, if you buy a luxury car, it’s unlikely you’d be able to keep it from liquidation. In this case, you may be better off filing for Chapter 13 to avoid liquidation.

Need help deciding how to file for bankruptcy? can connect you with certified pre-bankruptcy counseling and legal services.

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