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Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

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New Member

Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

My wife and I are about to have our chapter 7 creditors meeting next week. The vehicle we have is a horrible loan I got after a previous repo years ago: 2006 Ford escape that now has 150k miles. The loan is $9,000 at 19% with 3 years left. I need to have a reliable vehicle as I work 45 miles each way, so  "beater with a heater" won't cut it. I want to focus my search because right now it is all over the place;

 

  • try for the most car I can afford by going to a reputable dealer (low mileage, new, lengthy loan, high-end interest, high-end total loan)
  • my wife suggested leasing the family car, then in a year or so I get a second more economical vehicle
  • reading the forums here today, I saw the suggestion to get a reliably used vehicle a few years old (~2012 ish) with higher miles, but cheap enough to put close to 50% down, then pay it off quick as can be by paying 3x the expected payments since I already planned on paying that anyways. (this seems like a no brainer now....)

 

My circumstances that effect my car choices:

 

  1.  Tall-ish family. I am 6'1" and my 12 year old son is soon to be as well
  2. My wife has a bad hip
  3. I work 45 miles away. mostly highway....ish. country roads with minimal stops for the most part
  4. Salary is $50k
  5. I already have a car payment budget of ~$350 including insurance. My family is comfortable with this payment.
  6. I have $2500 as a down payment, but I can't trust a $2500 car to last long enough to build credit fast enough

 

 

My score atm (albeit via creditkarma. I plan on getting myfico this week so I can check my score pre and post discharge) is TU: 567, EQU: 543. My plan is to hold off as long as possible, continuing to pay my current car payment (never missed one in over 2 years through 2 vehicles with this same place) then go to my credit union towards the end of June to start applying for credit. Based on what I have read, I am thinking I should be able to get an interest rate very close to 10%.

 

Am I close? or am I going to be severely disappointed.

 

Oh, and as everyone else says in their OP: this place is an amazing wealth of knowledge. thanks ahead of time to all of you!

Message 1 of 10
9 REPLIES 9
Valued Contributor

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

Trying the credit union route can improve the situation, but it's hard to say if you would get the rate you would like if those scores do not rise before then.
                               

Total Credit: $240,100Credit Utilization: 1%AAoA: 5 years, 7 monthsInstallments: Car Lease, Marcus LoanNegatives: 0

LOWES-35k | BOA-32.5k | AMEX-30k | DISC-27.1k | ALLIANT-25k | NFCU-25k | BARC-15k | BBUY-12k | CHASE-10k | WAL-10k | CITI-9.7k | PENFED-9.7k


Message 2 of 10
New Member

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

I am pretty much ready for that as well (not sure the wife is though). This makes the "reliably cheap" car where I can plunk down 50%-ish enticing: even if I am still stuck with a 15% rate, as long as I am only financing no more than, say, $4k, that should keep my payments to where I can pay it off without losing too much value on the vehicle. I can then either keep it as a work vehicle and get a good rate in a year or so on a new family car/for my wife.

 

I guess the conundrum I am faced with is: am I going to wind up going through the hassle of car dealerships only get a slightly better vehicle at a silightly better rate? My lawyer said they would try and work with my current finance company as part of the affirmation, so if they miraculously knock like 12% off my existing rate, I am in a way better situation except for the fact that this vehicle is old for a 2006 and I've already put 50k miles on it.

Message 3 of 10
Moderator Emerita

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

I am assuming you are surrendering your vehicle which I think is a terrific idea. In a Bk 7 you dont have to surrender until the end of the process (usually).  I mention this to say hold on to it as long as you can legally do so. You will get a much better interest rate when you have your discharge in hand.  If you finance something before your discharge the rates are much, much worse.

 

The reason I recommend a beater with a heater is because your score improves dramatically within a month or two or six, depending upon your actions, and if you can work through that short time after the discharge you can end up with an extremely low rate. Read some of the stories in the Rebuilding Your Credit section and you will see some very attractive rates after Bk after a relatively short rebuild period.  

Message 4 of 10
New Member

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)


@StartingOver10 wrote:

I am assuming you are surrendering your vehicle which I think is a terrific idea. In a Bk 7 you dont have to surrender until the end of the process (usually).  I mention this to say hold on to it as long as you can legally do so. You will get a much better interest rate when you have your discharge in hand.  If you finance something before your discharge the rates are much, much worse.

 

The reason I recommend a beater with a heater is because your score improves dramatically within a month or two or six, depending upon your actions, and if you can work through that short time after the discharge you can end up with an extremely low rate. Read some of the stories in the Rebuilding Your Credit section and you will see some very attractive rates after Bk after a relatively short rebuild period.  


I have been under the impression that having diverse types of credit is a quick way to build credit, as long as it didn't make debt/income ratio skyrocket, so I figure a small loan that I can easily pay back fast would be the best bet when paired with a starter secured card. Even better if it gets me twice the quality in vehicle that also won't lose too much value by the time I am able to have it paid off. Plus, if times are tight and I can't pay 3x the payment, I can still pay what is due without being enticed back into old habits of puttin bills off when inconvenient.

 

Am I missing something? I bet I am because there is a lot to take in and finances are not exactly my forte (obviously).

Message 5 of 10
Regular Contributor

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

I've always considered Toyota's and Honda's to be the most RELIABLE when it comes to driving alot of miles. Most of them are good for over 200k miles with routine maintenance. Furthermore, I use drive about the same distance each work day for 15 years in a Toyota Camry, Honda Accord and one UNreliable Mitsubishi. And the monthly payments were all around $300 to $350 a month too.

Those are my recommendations... Good luck to you.
I've been where you are trying to go and I don't wanna go back.
Message 6 of 10
Super Contributor

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)


@hooah212002 wrote:

@StartingOver10 wrote:

I am assuming you are surrendering your vehicle which I think is a terrific idea. In a Bk 7 you dont have to surrender until the end of the process (usually).  I mention this to say hold on to it as long as you can legally do so. You will get a much better interest rate when you have your discharge in hand.  If you finance something before your discharge the rates are much, much worse.

 

The reason I recommend a beater with a heater is because your score improves dramatically within a month or two or six, depending upon your actions, and if you can work through that short time after the discharge you can end up with an extremely low rate. Read some of the stories in the Rebuilding Your Credit section and you will see some very attractive rates after Bk after a relatively short rebuild period.  


I have been under the impression that having diverse types of credit is a quick way to build credit, as long as it didn't make debt/income ratio skyrocket, so I figure a small loan that I can easily pay back fast would be the best bet when paired with a starter secured card. Even better if it gets me twice the quality in vehicle that also won't lose too much value by the time I am able to have it paid off. Plus, if times are tight and I can't pay 3x the payment, I can still pay what is due without being enticed back into old habits of puttin bills off when inconvenient.

 

Am I missing something? I bet I am because there is a lot to take in and finances are not exactly my forte (obviously).


Actually - debt to income ratio is not part of the scoring models. It may effect how much you can borrow, but not your scores.

I would suggest opening a SDFCU account, and doing a SMALL secured loan and credit card ($500 will get you both), do it right after the BK is discharged.

Most Recent FICO 8 Scores EX616/TU587/EQ607 01/09/2018 Starting scores 553/485/543 08/25//2017
~~~Credit lines~~~~
SDFCU VISA Secured $250
Discover Secured $200
Message 7 of 10
New Member

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)


@NormanFH wrote:

@hooah212002 wrote:

@StartingOver10 wrote:

I am assuming you are surrendering your vehicle which I think is a terrific idea. In a Bk 7 you dont have to surrender until the end of the process (usually).  I mention this to say hold on to it as long as you can legally do so. You will get a much better interest rate when you have your discharge in hand.  If you finance something before your discharge the rates are much, much worse.

 

The reason I recommend a beater with a heater is because your score improves dramatically within a month or two or six, depending upon your actions, and if you can work through that short time after the discharge you can end up with an extremely low rate. Read some of the stories in the Rebuilding Your Credit section and you will see some very attractive rates after Bk after a relatively short rebuild period.  


I have been under the impression that having diverse types of credit is a quick way to build credit, as long as it didn't make debt/income ratio skyrocket, so I figure a small loan that I can easily pay back fast would be the best bet when paired with a starter secured card. Even better if it gets me twice the quality in vehicle that also won't lose too much value by the time I am able to have it paid off. Plus, if times are tight and I can't pay 3x the payment, I can still pay what is due without being enticed back into old habits of puttin bills off when inconvenient.

 

Am I missing something? I bet I am because there is a lot to take in and finances are not exactly my forte (obviously).


Actually - debt to income ratio is not part of the scoring models. It may effect how much you can borrow, but not your scores.

I would suggest opening a SDFCU account, and doing a SMALL secured loan and credit card ($500 will get you both), do it right after the BK is discharged.


You're right, my mistake. I was confusing it with credit/debt ratio (of which is currently negative for me since I have zero credit but tons of debt). Thanks for pointing it out and clarifying.

Message 8 of 10
New Member

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)

Thanks for the tips. I've actually been looking at some older Camry's with 100k+ at around $5-6k and it seems like I can get a decent vehicle that should last a lot longer than I need it to (with proper maintenance)

Message 9 of 10
Moderator Emerita

Re: Better option for new vehicle after chapter 7 (I think I know, but I don't like the answer)


@hooah212002 wrote:

Thanks for the tips. I've actually been looking at some older Camry's with 100k+ at around $5-6k and it seems like I can get a decent vehicle that should last a lot longer than I need it to (with proper maintenance)


^^Excellent!  This gives you time to get  on your feet after you get your discharge Smiley Happy

Message 10 of 10
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