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Established Member
Posts: 26
Registered: ‎05-13-2017
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Going through Chapter 7 Bk and need a car

I just had my 341 meeting last week. My car is not doing very well, I will need to get one soon. I will have about $6k or $7k. Should I use that as a downpayment on a car loan for a used car after my discharge, or just buy one with cash? I obviously need to work on my credit, but I don't know if I should work on it different ways after my Bk is discharged. My credit score is about 570. It has gone up about 30 points since I filed Bk.

 

TIA.

 

JustMoi

~ Chapter 7 Bk filed 3/9/2017 | 341 5/9/2017 | Discharge 7/24/2017~
Starting Ficos: EQ 503, TU 475, EX 533

7/29/2017: EQ 597, TU 535, EX 576
Cards: OpenSky $500 Secured - Berkshire Bank $300 Secured - SDFCU $500 Secured - Capital One: $300
Established Member
Posts: 11
Registered: ‎01-07-2017
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Re: Going through Chapter 7 Bk and need a car

Well if you havn't already, the mailers should be rolling in soon from all kinds of car dealers wanting your business.  They watch the courts for bk fillings and they get the info and send you offers for financing.  I am sure the rates are horrible, i do not know but i can only imagine.  Like everyone says read over everything before signing anything.  Also check with your current bank or credit union about possible financing, as well as most dealerships have special financing, ie sub prime financing, but be prepared to pay 18%+ on an interest rate along with a considerable down payment.  Dont throw the whole kitty at them upfront, only bring what you are comfortable putting down that way you have wiggle room.  Also do some research online about dependable cars and such so you get the most bang for your buck.

Valued Contributor
Posts: 1,616
Registered: ‎12-16-2014

Re: Going through Chapter 7 Bk and need a car

Welcome to Myfico, you will find this site to be a tremendous resource in your rebuilding efforts.  Knowing that post discharge you will be reestablishing your credit and it will improve fairly rapidly, in fact those who file BK tend to be able to rebuild faster than those who don't.  With that knowledge I would visit the rebuilding section and develop the best strategy for credit cards etc that will help to establish positive trade lines, also some do share secured loans with Alliant and repay it right away to get a postive installment loan history.  Point is the better your scores the cheaper the car is going to be (lower interest) we are talking thousands over the life of the loan so in my opinion I would wait as long as I could to get reestablished because the difference between 18% and say 10% is huge.  If you have to take a high interest loan you certainly want to be careful to ensure that you put yourself in a position where it will be possible to refinance it as your credit improves.  I didn't file BK but did a rebuild and for example I went from 12.57% to 4.29% in 7 months of rebuilding saving me over 7k in interest over the life of the loan.  To do that you need to improve your scores and have the loan to value ratio that is acceptable so having a down payment upfront is the best way to absorb the depreciation hit and transaction costs that come with any car purchase.  The good news is that it is well documented in the industry journals that the market is being flooded with lease return cars which is bringing down used car prices so one good way to protect yourself from depreciation after the purchase would be to pick up one of these lease return cars.  Dealers are pretty predatory when your credit is beat up and they know you really need to the car so be aware that they will get you qualified but will likely try or be successful in marking up your interest and will likely try to add warranties and other high profit items to the deal which will hurt you in the long run.  

Gardening till 2018, Goal of 700's by the end of 2017
MyFico Scores Aug 2017: EQ 675 TU 695 EXP 698
Contributor
Posts: 155
Registered: ‎06-02-2016

Re: Going through Chapter 7 Bk and need a car

There will definately be lender's willing to finance a vehicle for you directly after BK discharge or even during a BK. However, as other's have pointed out the interest rates could be north of 18% (depending on how your credit profile looked before the BK), these lender's specialize in BK financing because in a way it's a safer loan for them in the aspect that you can't file for BK again during the course of the loan. Some of these lender's include, CPS (consumer portfolio services), Prestige Financial, and Santander will finance after discharge or during a CH 13 with a trustee letter.

 

If I were in your position I would try to obtain a few credit card's and possibly a personal installment loan to build positive payment history after the bankruptcy and make do with your current vehicle for as long as possible. Having a little time under your belt with positive payment history after a BK will not only boost your score's but open up your credit profile to more prime lender's such as credit union's, Ally, Wells-Fargo, etc that will get you better interest rates.

 

I would try to make due with what you have for as long as possible isntead of punishing yourself with a high interest rate car loan that will build negative equity very quickly making it difficult to refi at a later time, many people get stuck in these loan's because of negative equity with little to no option's other than refinancing with a large sum of cash down, or purchasing a brand new vehicle with rebates to eat up the inequity ( which isn't a great solution to the problem in my opinion)

AMEX BCE ($34,500) CITI AAdvantage ($17,000) Region's Platinum Card ($12,000) Discover IT ($13,000) Macy's ($7,400) Chase FU ($10,000) TU:768 EX: 767
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Posts: 26
Registered: ‎05-13-2017
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Re: Going through Chapter 7 Bk and need a car

Thanks for the advice. Pickle76, yes they have been rolling in. I have been gathering a lot of information about credit rebuilding, and making a plan for after my discharge, but my car is really doing bad. I don't even know if it will last until my discharge, so I don't have a choice about getting another car. I can put about $5k or $6k down, which should make it a bit easier to get approved. I am hoping to refi after a year or so, after my credit has improved. 

 

 

 

 

~ Chapter 7 Bk filed 3/9/2017 | 341 5/9/2017 | Discharge 7/24/2017~
Starting Ficos: EQ 503, TU 475, EX 533

7/29/2017: EQ 597, TU 535, EX 576
Cards: OpenSky $500 Secured - Berkshire Bank $300 Secured - SDFCU $500 Secured - Capital One: $300
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Valued Member
Posts: 58
Registered: ‎09-23-2016
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Re: Going through Chapter 7 Bk and need a car

Some people choose to wait a few months and buy a cash car and follow the "700 in 24 month" plan that is posted on here, which would significantly help your credit out in just 6 months to a year. At that point then would they get an auto loan. 

 

My circumstances were different being that I'm in sales so I needed a relaible lower mileage car as I drive 25K + miles a year. As Semo mentioned, Santander, CPS (Consumer Portfolio Servies), and Road loans will finance right before or right after DC. I was financed by CPS with a 17.5% interest rate with two auto loans IIB but otherwise several perfectly paid auto loans prior to BK. Santander didnt approve me but Road Loans approved me up to $30k with a interest that varied depending on the vehilce if it were new or not. Road Loans tells you which dealer to go to within their network and none of those dealers had a car I wanted. The dealer I went to had a relationship already established with CPS. 

 

The trick to waiting is that a lot of the captive lenders want to see some type of auto history after a BK regardless how well you've built your credit after a DC. Some mainstream brands like Toyota/Ford might be more leninent but It doesnt hurt to get a head start and finance a high interest loan for a year then refinance for a lower interest rate. This will only just help your credit in the end. 

BK7 08/2016 DC 12/2016
Cap1 Quicksilver $3000 | Merrick Bank $1400 | Credit One $450 I CFNA $1200 (Survived BK7)
I Starting Score 10/2016 Fico8: TU 597 I EX(LP) 607 I EQ 592
I Current Score 9/2017: TU 651 | EX 658 | EQ 665
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Registered: ‎05-01-2017
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Re: Going through Chapter 7 Bk and need a car

 


JustMoi wrote:

Thanks for the advice. Pickle76, yes they have been rolling in. I have been gathering a lot of information about credit rebuilding, and making a plan for after my discharge, but my car is really doing bad. I don't even know if it will last until my discharge, so I don't have a choice about getting another car. I can put about $5k or $6k down, which should make it a bit easier to get approved. I am hoping to refi after a year or so, after my credit has improved. 

 

 

 

 


I must say that I can relate. I filed in February. 341 in March. Joined NFCU in April. Discharged last week. I applied today online & was instantly approved for an Auto Loan with NFCU. Interest rate is less than 5%. I am sooooo glad I didn't accept any other offer even though I had my credit ran several times before discharge. So if you haven't gotten a vehicle yet, don't stress. Carvana was pulling me at 8.5% 2 days post discharge. 

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Re: Going through Chapter 7 Bk and need a car


JustMoi wrote:

Thanks for the advice. Pickle76, yes they have been rolling in. I have been gathering a lot of information about credit rebuilding, and making a plan for after my discharge, but my car is really doing bad. I don't even know if it will last until my discharge, so I don't have a choice about getting another car. I can put about $5k or $6k down, which should make it a bit easier to get approved. I am hoping to refi after a year or so, after my credit has improved. 

 

 

 

 


Don't run out and get a car with a payment right away.  Learn from your Bk. I have been where you are now. Use your $5k or $6k to buy a cash car (even less).  Set up your budget first.  Rebuild your credit. Then when you have a good score and savings, buy something with payments. 

 

Too many people discharge their debt and then go out immediately and run up debt again with a new vehicle payment. It makes zero sense to get back into debt immediately after your discharge.  

New Member
Posts: 2
Registered: ‎05-01-2017
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Re: Going through Chapter 7 Bk and need a car

A car has payments. Poster can get a car loan for $10,000 use the 5k to put towards first few payment to pay down the debt immediately. Instantly boosting credit score and is only in debt for 5k. An installment loan is a great way to build credit. Make your payments on time every time. Learn from your bankruptcy and if wait until discharge you get a really decent rate.

My interest rate was 18%. Santander can come get this car. And I'm happily financing a $10000 at 4% thru a credit union.
Frequent Contributor
Posts: 445
Registered: ‎12-10-2012

Re: Going through Chapter 7 Bk and need a car

5k can get you a good car. No reason to pay some predatory lender 15% or more interest when you can pay cash and pay zero interest.
NFCU Sig Cash-20k/ Amex BCP-19.4k/ Amex Costco-1.2k/Chase Marriott-12k/CSP-13.4k/ Freedom-5.5k/ Discover IT-14k/NCSECU-5k/Walmart-10k/Lowes-25k

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