September 2, 2014

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Auto Finance During Bankruptcy

There is a myth that you can’t get a car loan until your bankruptcy is discharged. And that’s just what it is — a myth. We arrange these loans for our customers every day. It’s our specialty.


Customers constantly tell us that other car dealers say “We can’t help you while your bankruptcy is still open. Come back when you’ve received your discharge. We might be able to help you then.”

In a lot of ways — they’re right. They really can’t do much. It’s not because it can’t be done — it’s because they don’t know how.

First of all, you need to know that there aren’t any laws that prohibit your getting a car loan while your bankruptcy is still open.

The stumbling block is in finding a source of financing that will offer a loan before a bankruptcy discharge.

There aren’t many lenders that offer these loans. Of the ones that do, they tend to be highly selective in the dealerships that they allow to participate in their programs, requiring special experience and a track record of strong expertise.

This is not your ordinary car loan.

At Fresh Start Indy, we’re pleased to be able to offer you a variety of lenders specializing in this type of loan. For many of these lenders, we’re the only dealership in our area to satisfy their unique & demanding requirements.

Now, let’s get to the point. We work with the two most common types of bankruptcy.

Chapter 7 Bankruptcy

First, there’s the Chapter 7 bankruptcy.

This is the program where you essentially include all debts in your bankruptcy filing and, upon discharge, you are no longer obligated to repay those debts.

In a Chapter 7 bankruptcy it is entirely possible to arrange auto financing prior to the discharge. There is a widespread misconception that the bankruptcy must first be discharged.

Typically, most auto dealers and banks will inform you that you must have a discharge in order to qualify for auto financing.

The reasons behind their statement are usually due to the fact that they are unaware of the financing programs available or they were unable to qualify for these programs.

In the case of the banks telling you to first get a discharge, they usually are using this as a delaying tactic. They’re really not interested.

Over the years, we have built several outstanding relationships with lenders that specialize in making this type of loan. For the most part, these lenders tend to be “exclusive” in that only select dealers are allowed to offer these programs within a given marketplace.

Chapter 13 Bankruptcy

The other type of bankruptcy most commonly encountered is Chapter 13.

This is a debt-repayment plan that is typically set up for a 3 to 5 year period. Obtaining auto financing while in this program is actually quite an easy process.

One of the most common obstacles is the lack of a thorough understanding of the process and procedures that must be followed.

Both Chapter 7 and Chapter 13 auto loans are regulated and monitored by the bankruptcy courts. These areas require a thorough knowledge and understanding of all the rules, regulations and processes that must be followed.

Unfortunately, most auto dealers simply don’t have this expertise.

We specialize in these loans.

Through the years we have built up a level of trust and credibility with our lenders, the courts and the trustee’s offices. Our experience and expertise give us the ability to accomplish what other dealers say is impossible.