September 2, 2014

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Auto Finance After Bankruptcy

All too often, we encounter situations where customers have not surrendered vehicles during their bankruptcy. Not realizing that they could arrange financing for a replacement vehicle before their discharge, they are now faced with the task of locating a source of financing after the discharge.

Although each individual circumstance will differ, you need to know that it is not only possible but fairly easy to get approved for auto financing after a bankruptcy.

A couple of the more common mistakes we see made by people in this situation include:

  • Purchasing from a Buy-Here Pay-Here dealer
  • Re-affirming an existing auto loan when they are hopelessly upside-down

The Buy-Here Pay-Here Trap

Whenever people rush into this type of financing, they are usually setting themselves up for a bit of a shock. Your state may regulate the interest rates on the loan, but you can bet that the price of the vehicle is not subject to any sort of regulation. That dealer who told you that your contract met the state guidelines may have been telling you the truth.

What he didn’t tell you was that even after making a huge down payment, you are not going to be able to trade that car in. Not until you’ve made the last payment. And the chances are, the car won’t last that long. So if you’re caught in this trap, realize the best thing you can do is get that loan reduced as fast as possible.

You Re-Affirmed

Thinking that you wouldn’t qualify for a new loan, you followed the logic that most people use. You re-affirmed. And now, you owe $20,000 on a vehicle that’s worth $6,000. So just what do you think it will take to trade that vehicle for a new one? If you answered $14,000, you’re close.

Does this mean you’re stuck? Not at all. Remember, each individual circumstance is different. It’s definitely worth your time to check it out. Even though you may find yourself in one of these situations, it may be more than possible to get out of it.

And if you’re in a car loan and your bankruptcy has not discharged, get in touch with us now.