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Buying a vehicle while in chapter 7 Bk

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New Member

Buying a vehicle while in chapter 7 Bk

Hey everyone. I've been reading the forums for a while now. I recently filed for BK, have already gone through the meeting of the creditors, and now just in the waiting game. First of I just wanted to say its been extremely helpful to learn from all of you who post and give information. Now on to my question. Due to the wife's vehicle just going out on us, I am going to have to enter the vehicle makret a lot sooner than I would have liked. I was hoping to see if anyone had advice on the best route to take on this matter as far as getting the loan, who is best to get the loan through and any pitfalls to watch out for along the way. I will be putting down 3,000 and will likely add whatever trade in value we receive for the vehicle (probably another 3,000). Price range max is $30,000 before any down payment.

As a disclaimer, I wanted to wait atleast a year post BK, but the circumstance of the two of us needing reliable vehicles and the safety of our son means way more to us. Any advice is much appreciated.

Message 1 of 15
Frequent Contributor

Re: Buying a vehicle while in chapter 7 Bk

Well, don't go the dealership route. I assumed that my auto history since 2007 (perfect payments) would fly AFTER bankruptcy, but apparently not.


I wanted to get out from under my 2015 Jetta and roll the $1800 in negative equity into a 2016 Buick Encore.


Scores in siggy are about what the auto dealership pulled - although he's shopping my financing needs around, he's gotten 2 denials thus far, which doesn't look good for me. Income can withstand the payments.....


My suggestion is to hit up a credit union. DO NOT use any of the yayhoos you got in the mail so far (I'd assume at least 2 have hit your mail so far). They are designed to approve everyone and show ZERO interest rate love to anyone.


CU's show decent love. Capital One auto will probably not during your CH7. And if they do, I'll march up to their corporate office and raise a stink. I filled out the prequalification, to no avail.


Makes ZERO sense that I am being extended unsecured credit (a higher risk) but not getting secured credit (which auto dealerships now know any loan they give me HAS to be paid, knowing a REPO or Ch7 cannot happen...or at least the risk is minimal).


Sorry I ranted. Hope you found clarity in there somewhere.


PS: a slew of auto inquiries grouped together within 30 days only count as 1 towards your FICO score. That doesn't mean I'm saying go bananas applying, but just know that one source running one app through multiple sources is scored as 1 provided they occurred within 30 days of each other.


Ch7 Discharge: 5/14/2016 | 8/15/2016 scores: EQ 631 | TU 624 | EX 641
Message 2 of 15
Valued Member

Re: Buying a vehicle while in chapter 7 Bk

My niece who is presently in chapter 7(March, 2016) was able to get a new car with trustee approval right after her 341 meeting.  She presented the letter to the dealership at BMW and they approved her for a 2015 toyota corolla.  Her interest rate is high but she only has a car payment to make.  She will refinance in 6 months.

Message 3 of 15
New Member

Re: Buying a vehicle while in chapter 7 Bk

What kind of letter was it?  

I have received tons and tons of letters in the mail from car loan companys about buying cars while in bankruptcy. My fear is they aren't legitamate in some way or form.


Message 4 of 15
New Member

Re: Buying a vehicle while in chapter 7 Bk

I'm also hoping to find out realistic interest rates and what I should be shooting for. As it stands today (pre- discharge) my EQ score is 570

Message 5 of 15
Frequent Contributor

Re: Buying a vehicle while in chapter 7 Bk

Good luck with getting 'realistic' APR's post-discharge.


I can't get below 12% with 9 years of perfect auto payments.


I'm getting approvals (Chrysler Financial) but they won't give me squat for my '15 VW with 5692 miles on it. APR seems to be over 16% (I saw a Fiat 500x Easy that I wanted, they're telling me payments would be in the $500+ range BEFORE I roll $5600 in negative equity).


It's frustrating....especially since I got 15 auto approval letters from predatory lenders not even 1 week after I filed.

Ch7 Discharge: 5/14/2016 | 8/15/2016 scores: EQ 631 | TU 624 | EX 641
Message 6 of 15
New Member

Re: Buying a vehicle while in chapter 7 Bk

I'll share my mom's situation and experience with you:  She filed CH13 and was about five months from discharge when she was suddenly in the market for a new vehicle.  Banks will seldom approve an auto loan before a bankruptcy is discharged, whether that is CH13 or CH7.


In my mom's case, she was told that she would need a letter from the trustee authorizing the purchase of a vehicle and to bring that to the dealership.  Once there however there were no guarantees to financing.  The "program" that was worked out by the dealership was to offer her a vehicle that they chose (my theory was they purchased it cheap from a trade in and marked it way up), the vehicle, a Hyundai Sonata with 99,000 miles on it was a piece of junk but that was what the "bank" approved for this type of situation.  The interest rate I want to say was like 20+%.


We walked out of the dealership and decided to share a vehicle for the five months until she obtained her discharge letter.  


My advice would be to wait if at all possible for the discharge.  You will get a much better result.  Keep us posted with what you decide and good luck!

Message 7 of 15
New Member

Re: Buying a vehicle while in chapter 7 Bk

I will definitely be waiting until I get my discharge, which should only be about 2 weeks away. With close to $8,000 down, I would think that I could manage a decent intertest rate. Does anyone have advice on the best lender for a week post dishcarge?

Message 8 of 15
Valued Contributor

Re: Buying a vehicle while in chapter 7 Bk

Even with $8k down, a fresh bk and no rebuilding you most likely will not get anything but predatory lenders and their sky high interest rates.

What exactly is wrong with the car? If you can still get $3k on a trade in, it seems to me that is still has value. What is the safety concern, is it cheaper to fix? Is it currently paid off? If not, why did you reaffirm? I'm a little confused here.

If it were me, I'd take the $8k you have, buy a used car, outright for cash. Drive it into the ground, rebuild your credit and save for a new car. You can get a nice used card that will run well for a long time at that price and avoid payments and bills fresh out of a bk.

back to a seedling 3/17/18
Message 9 of 15
New Member

Re: Buying a vehicle while in chapter 7 Bk

The car is paid off. The car is valued at 3,000. Any car has value. There are major engine problems and with having the two of them break down on the highway and be put in harms way. There are going to be ton of repairs that it needs on top of needing new tires and a few other items. It doesn't make senes to sink $5,000 into a car that is having major problems and is that worn already.

Message 10 of 15
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