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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, 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.

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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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