Bankruptcy and Vehicle Financing

cliffy1 · January 2003

Yours is a perfect description of what *should* happen. You seem to be the perfect example of what "second chance" lending is all about. You made the best of your second chance and understood the benefits to not taking short cuts. You didn't expect anything to be given to you that was not earned. I wish all my customers had that level of responsibility.

fezo · January 2003

I think the preahiness was directed at the once poster (whare ARE you mazda?) because to many it looked like he just using his BK as a conveniece rather than a need and his insistence that while in BK he wanted a new car. While some of the back and forth got heated I think it was a fair debate. If you read through the posts even the biggest moralizers did not call for an end to individual bankruptcy - merely tightening the rules. The original posted didn't do any of the legwork that you did, but I'd still like to hear how he is doing.

At any rate, good job on your part. That number will keep going up if you stay on the path you've set.

afk_x · January 2003

Citigroup made billions of profit in their consumer debt area even while writing off billions due to bankrupcy.

Yes, billions.

nice · January 2003

I WENT BANKRUPTCY 13(WAGE EARNER)2001 BECAUSE I HAD MAJOR SURGERY AND WAS BEHIND ON MY BILL. DO YOU THINK THAT I CAN GET A CAR WITH A DOWN PAYMENT, AND A LOAN.

abtseller · January 2003

payments on the Ch 13, you will need a letter from the bankrupcy court approving you to borrow money.

If the bk is discharged, you shouldn't have any problems, with 10-15% down.

Ed

CarMan@Edmunds · January 2003

Hi nice. I have a feeling that you will find the following article that is available here at Edmunds.com very helpful: Tips For Subprime Borrowers - Making the Best of Blemished Credit. If your bankruptcy has been discharged and you have been paying your subsequent bills on time without racking up a ton of debt I definitely do not think that you will have any trouble financing a new vehicle, especially if you have money to put down. Granted, you won't be able to qualify for banks' lowest interest rates, but I do believe that someone will approve you.

Car_man
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nice · March 2003

THANKS ABSTSELLER AND CAR MAN HOST FOR THE INFORMATION. BUT DO YOU THINK A FINACE COMPANY WILL HELP GET ME A NEW START

akangl · March 2003

Our bankruptcy was dicharged February 6, 2003 and we were approved for a loan on our truck February 19, 2003. Granted we went with a small dealer that specializes in people with bad credit and they have their own finance company, BUT, it will be reported to the credit bureaus which is all we cared about. We bought a 1994 Chevy K2500 x-cab truck with 127,000 miles on it for $10,995, we put the equity from my paid off suburban ($4100) plus $900 cash down and financed the rest.

We were told by everyone else that lenders typically like to see 6 to 12 months of good credit post bankruptcy. Secured loans, credit cards, stuff like that helps. We will be financing a brand new vehicle this next winter after the truck is paid off in December.

Be patient, it'll happen. Right now we have the truck loan and one credit card....we have our house loan too, but it doesn't get reported since we didn't reaffirm the loan.

jeffcrowley · March 2003

Hey man, been there done that, had the t-shirt repo'ed and sold to creditors... We did a ch. 13 back in 97 and paid on it until it was finally discharged in Feb 2002. We got a credit card after the discharge that we used very carefully, and always paid in full each month. In October, we were able to buy a 2003 Tahoe at 10% interest with only $500 down.

Of course, our situation now is vastly different than it was when we filed, and our debt (extremely low, we learned our lesson) to income (which has gone up a lot since then) ratio is extremely low. We were afraid to even go look at a new car after hearing horror stories from friends of 24% interest. 10% certainly isn't great with all of the 0% deals going on, but I remember a year or two ago when 10% was not a bad rate.

Bottom line, if you have truly gotten through your issues, and are taking full advantage of the fresh start, there is no reason you shouldn't be able to get into a decent car you can afford.

Good luck!

isellhondas · March 2003

That's the key here!

Funny, though...from my vantage point, a lot (most it seems)of people who have had a BK or other credit problems never seem to learn.

They demand the top of the line model, sunroof, leather or an expensive gas hog SUV that they really don't need.

I look at their income, debt ratio and their credit report and see them getting right into the same position.

It's easy to see why it happened in the first place.

Others (the smart ones) take a much more conservative approach.

akangl · March 2003

I totally agree with you. We gave up 2 vehicles and 2 trailers in our bankruptcy. Right now we have a 94 Chevy truck (bought 2 weeks ago) and a 94 Ford Escort (bought in December with cash).

We are planning on buying one more car and at first I was thinking like old times, the biggest baddest SUV out there. Then I really got thinking, what I NEED isn't a gas hog SUV, what I NEED is a fuel efficient little car that's safe and 4 door. We aren't planning on buying until the truck is paid off in December.

Our DTI is a very low 15% even with the truck payment and house payment and the one credit card that we have. All I can hope is that we did in fact learn our lesson.

isellhondas · March 2003

It sounds like you are back on track and it looks like you'll never be in that position again!

akangl · March 2003

Knock on wood that we won't ever be in that position again. It sucks to put it bluntly. I still find myself with old temptations and its hard learning to budget and live below our means. There are so many cool things out there that can be bought with no payments for 90 days, no interest for a year, blah, blah, blah. Ah well, live and learn and boy was it an expensive lesson.

mazdaprofour · March 2003

I just want you all to know that I am still alive and kicking. I have not take up one single credit card offer since my BK so things are going good. All car payments have been on time. I got approved for a apartment with no extra deposit and I am looking forward to not getting another credit card.

KCRam · March 2003

Mazda, thanks for checking in. Good to hear things are looking up for you.

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donnah · February 2005

I filed for Ch. 13 in Dec. 2004, only submitting credit card debt. I am able to continue to pay my mortgage, car lease, utilities, etc., just not the credit card balances. The trustee has objected to my car lease and wants it included in the Ch. 13 filing. Sales managers at 3 dealers told me that if the car is included in the bankruptcy filing, I will NEVER be able to finance another car again. Is this true? The current lease began 9/04 for 42 months. I tried applying for financing at 2 dealers but was declined as the Ch. 13 showed up on my credit report. Are the sales managers correct in that if a car is part of a Ch. 13 filing, you cannot finance any cars ever again, no matter how much you build up your credit after the bankruptcy is discharged? How can the trustee expect me to finance a car now with the Ch. 13 on my credit report (I asked my attorney, just waiting for the answer)?

driftracer · February 2005

is dicharged, you're actually a prime target for lenders, considering you can't build up a bunch of debt and file BK again by the time the car would be paid off.

You can't buy a car at all while your Chapter 13 is active - forget trying.

steine13 · February 2005

I'm not going to comment on the idea of getting into a lease in September, then file BK 4 months later.

As far as "cannot finance any cars ever again", nothing in this world is forever.

Except ex-wives :-)

-Mathias

volvomax · February 2005

Eventually, you will be able to finance a car, once the bk is discharged.
However, you will be paying very high interest if you are approved.
Lenders hate BK's of any type.

jlawrence01 · February 2005

This is definitrly a question that should be addressed to an attorney. Despite some of what you hear on TV, bankruptcy is a fairly complicated area of thr law in that the Bankruptcy law is federal but a number of aspects are governed by the state. Therefore, you could get three or four different opinions which are correct in the state that the poster is in but will not be accurate in your case.

What the trustee is *probably* objecting to is that when you file for bankruptcy, you must list all of your debts including the car lease or mortgage. All debts have to be included in the plan. The law does not allow you to discharge some and to pay others.

I think that it is pretty unrealistic to on one hand to file BK and then expect to get a loan. Why would I lend money to someone who has recently stiffed other people who have lent money to her?

ksccts · February 2005

Excellent point - "lease in September, bankrupt in January" People never learn!

akangl · February 2005

****Excellent point - "lease in September, bankrupt in January" People never learn!****

Having been through a BK myself I can understand how quickly things can change. Don't be so quick to judge without knowing all the circumstances. In our case things went from ok to oh no in 2 months. Its not a matter of *learning* or not, finances can change in a heartbeat.

mikefm58 · February 2005

" The law does not allow you to discharge some and to pay others. "

Aren't there a couple different types of bankruptcies? One wipes the slate clean and the other kinda forces certain lenders to work with you.

" Why would I lend money to someone who has recently stiffed other people who have lent money to her? "

Because they can't file BK again for several years (I think 7 yrs). They will be prime targets for lenders. They'll pay astronomical interest rates, but they will get credit. But not until the BK is completed.

dbauer · February 2005

its 6 years. and yes, you can claim certain lenders and not others. you have legal right to reaffirm a car and a home mortgage without penalty. this is with chapter 7, though...im not sure how chapter 13 works, but AFAIK, its simply a consolidation to the court, so there is nothing forcing you to include certain things.

jlawrence01 · February 2005

**Aren't there a couple different types of bankruptcies? One wipes the slate clean and the kinda forces certain lenders to work with you. **

In a Chapter 7, generally all debts are discharged. A debtor *may* reaffirm a debt (agreeing to pay it) and allowing the debtor to keep the house and/or the car. If a debt is not reaffirmed, the creditor gets the security back.

In a Chapter 13, the debtor prepares a reorganization plan to be approved by the bankruptcy trustee. One of the major components of these plans is that the debtor must pay all creditors with discriminating against certain creditors.

For example, a debtor filed Chapter 13 in the Northern District of Illinois. About 80% of her debt is a judgement that her former employer was awarded as she breached her employment contract. She filed three payment plans with the court, none of which paid a penny toward the judgement. The Court finally rejected her bankruptcy and allowed the main creditor to attach her assets.

**Because they can't file BK again for several years (I think 7 yrs). **

There will be some parasites that will lend her money after the BK. Most won't touch her with a 10 foot pole.

akangl · February 2005

****In a Chapter 7, generally all debts are discharged. A debtor *may* reaffirm a debt (agreeing to pay it) and allowing the debtor to keep the house and/or the car. If a debt is not reaffirmed, the creditor gets the security back.****

Actually in a 7 you can choose to reaffirm or not, if you don't you can still keep your car/house/whatever and make voluntary payments. That's what we are doing with our house, however, if something happens we can walk away and its still discharged in the bk. We did it this way due to the lender lying to us and our attorney.......heck, they still won't come clean.

****There will be some parasites that will lend her money after the BK. Most won't touch her with a 10 foot pole.****

If there is a good reason for the bk (medical, loss of job, disability, whatever) a lot of lenders will give loans. We got our first car loan through a CU 2 months post discharge, interest rate was high, but it was a start. My Titan is currently leased through NMAC and our Focus was financed by FMCC but we refied it to a CU.

rroyce10 · February 2005

.. **In a Chapter 13, the debtor prepares a reorganization plan to be approved by the bankruptcy trustee. One of the major components of these plans is that the debtor must pay all creditors with discriminating against certain creditors** ...

The reason why the dealer told you that is:

#1.) It hasn't been discharged .. and that might take 7/12 months depending on your area and what Federal courthouse is handling it.

#2.) It's a chapter 13 .. and 13's are a re-org and they can be a friggin' mess, and these can go on and on for 2/4/6 years depending on the pay-outs .. even when 13's show "discharged", these have a long shadow and only when all of the other debt is *fully paid* will it start to clear up - and thats "if" and "when" they reach the bureau's, if ever - and thats a story all to itself ..

Obviously I don't know the situation here .. but unless you had a business or a big gambling debt, this wasn't the way to go .. I think you might have gotten some bad advice and depending on the situation, you probably should have filed a 7 ..... "legit" BK's are not a good thing for anyone to go thru - the money, the loss of prestige, the ability to purchase ... not a good thing ..

Good luck ...

Terry.

cadillacmike · February 2005

"In a Chapter 13, the debtor prepares a reorganization plan to be approved by the bankruptcy trustee. One of the major components of these plans is that the debtor must pay all creditors with discriminating against certain creditors"

What does that last sentence mean? It doesn't make grammatical sense.

...must pay all creditors... (makes sense)

...with discriminating against certain creditors... (makes no sense and partially contradicts the prior phrase).

So what is it?????

jlawrence01 · February 2005

Terry quoted from me.

In a Chapter 13 Bankruptcy Plan, the debtor must prepare a plan that either 1) satisfies all debts or 2) in the case where that cannot be done, satisfies the debtors in a fair and equitable manner.

For example, debtor owes three creditors $10k each. The court would likely accept a plan whereby the creditor pays off all three creditors over the next five years. The court might accept a plan whereby the debtor pays off $5k to all three creditors if the trustee believes that that is the best the debtor can do over the next five years.

However, most courts will not accept a plan where two creditors get 100% of their debts paid and the third creditor is ignored.

crys635 · March 2005

My husband and I are going to be filing bk.
Our reason is we were stationed in Alaska for three years. While we were up there I was also working. bringing in $1600 a month on top of my husbands pay. We had went ahead and financed two vehicles, because I was unable to have mine shipped up there from Wyoming. To make a long story short. We had extended in Alaksa, and the last min, they decided to send us to Idaho. Once we got down here to Idaho, my husbands pay litterally, I mean litterally cut in half, and on top of that, I had to become a stay at home mom of two. Yes my job transfered, but by the time I brought home my pay, ALL of my pay was going to daycare + some of my husbands. It just wasn't worth it. So now here we are, we voluntaraly turned in both of our vehicles, because we couldn't afford the payments, and had to take back my saturn, which has 113,000 miles on it. The saturn is now paid off, but we still can't afford the montly payments on the difference in our other vehicles after paying bills, groceries, diapers, and the other stuff you need to live. So after talking to several finacial advisors, they all told us our best bets are to file bk. But, my boys are getting bigger and are costing more. I am not proud of the situation we are in, but in some cases, it is just better to do what we have to do.

wiprunner · March 2005

any recommendations on lenders that will approve post bankruptcy?

smokinjo · April 2005

Does anyone know where to go to get financing while in Chapter 13 Bankruptcy.

I hit a deer and my insurance company totalled my car out. I have since gotten a letter from the Trustee to incur a debt. I really have not tried to get financing yet, but I have found several vehicles and need to get the ball rolling. While searching the subject

I found this site and thought I would ask.

Any feedback on this would be most appreciated

isellhondas · April 2005

If you can get financing at all, you won't like the terms you are offered.

barbalee · April 2005

I'm in the process of a Chapter 7. Major medical bills and a shrinking school that meant I would lose my job (after 27 years) forced me into it. I'm a single mom of 3 sons, and I'm voluntarily surrending my car (a 2000 Lumina with 110,000 miles) and my son's pickup (a 1994 Chevy with 185,000 miles) since I owed much more than they were worth despite having never been late or missing a payment (still owed $12,000 on them). I reaffirmed debt on my oldest son's pickup since it was the only vehicle we were right side up on. He's employed and now seeking a loan to take it over, but that hasn't happened yet. My current two vehicles are still in my possession right now.

I tried re-negotiating with the lenders for morre reasonable prices on those vehicles, but they won't even talk to me. I start a new job as soon as this one ends, but because we live in a very rural area, I cannot manage without a vehicle. There is no public transportation, and the closest grocery store is 25 miles away.

Suggestions? Will I be able to lease or purchase a used vehicle of some sort? To whom should I begin talking?

I'd appreciate all advice I can get...this whole situation is very painful.

cadillacmike · April 2005

The President signed the new BL law a couple days ago, so folks like that person from 2.5 yeas ago who just wanted to walk away from his debts, even though he had a job, will find it much harder.

isellhondas · April 2005

Our current BK system isn't working the way it was designed to.

cadillacmike · April 2005

And that butthead that wanted to dump and run is just an example of the worst out there...

jmb40 · April 2005

I have full coverage on my car and it was stolen, it just happened so I am wondering what happens with the insurance company. Will they still pay the car off and give me the difference if the worth of the car is more than I owe or do they just pay the car off and that is it?

cadillacmike · April 2005

See the insurance forum on this.

They pay the "value" of the car which may be more or less than what you owe.

Oops, I noticed that you are in a ch 13.

I have no idea, experts????

good luck getting a "new" car in this situation.

jmb40 · April 2005

If I am correct about this I have to get permission from the trustee in order to finance another car if I can find a car dealer who will even deal with me under Chapter 13.

danf1 · April 2005

You are correct. The problem with that is the Trustee normally will not give you permission until you have an approval in hand with all of the exact figures. The banks typically will not give you an approval until you have a letter from the Trustee. I've been doing this for 7 years now and have never been able to make this situation work. Good luck. I hope you can make it work out.

jmb40 · April 2005

In my post #755 do you happen to know anytrhing about how they handle a stolen car. Please let me know if you do.

danf1 · April 2005

I'm not a lawyer so I will tread lightly around that part. My best guess is that it should be the same as any other case. The bank gets what the insurance guy pays, and you would get the difference if there is one. BK is touchy so I wouldn't guarantee that, but it seems logical.

jmb40 · April 2005

I have read some stuff about people getting approved by the trustee to sell there homes while under chapter 13 and they got the difference from the sell but didn't have to turn it in to the trustee so I am figuiring that is how this will work. I think there is a big enough difference in what I owe and how much my car is really worth to be able to purchase a used vehicle without refinancing one. I really do thank you for trying to help.

xpfshost · April 2005

I'm about 3 years past my discharge date from my Chapter 7, and I got approved at Citifinancial at 8.5% and Commerce bank for 6%. Obviously, I've been re-establishing credit since the bankruptcy. Good luck.

rroyce10 · April 2005

....... Actually the new law is a joke, it's pathetic .. we can thanks Mr. Lerner and MBNA for this one .. they have made more money in the last 7 years than any other time in credit history ..... maybe they shouldn't send out 5 million credit cards a year to students and folks that don't need them .. ooh what stupid idea that might be ...........

Anyway, back to the car theft ........ the trustee will get any extra $$ (if there is any) after the insurance company settles after all the smoke clears ..

Terry.

steine13 · April 2005

"Actually the new law is a joke, it's pathetic .. "

I agree. Responsibility should work both ways, and now lenders will have very little incentive to be restrictive when loaning money.

Still, it's not quite as cute as when the credit card industry went before Congress some years back and begged for the government to help cover people's bad debt. That was great entertainment, and I was happy to see it went nowhere...

Anyone remember the details of that proposal?

-Mathias

bongo2363 · June 2005

What type of percentage rate am I looking at when I decide to purchase a vehicle in September? I filed Ch. 7 in 1998 and currently have a credit score of 631. I am looking at purchasing a Honda CR-V with about $7000 down and financing $17000. Is this going to be impossible for me?

danf1 · June 2005

With that much money down you will get financing. A large downpayment minimizes the banks risk, making this an attractive deal. Your rate will probably be higher than you want it to be, but you will get your car. Think of this as your last bad loan. Your BK will be off your report in about three years. Once this car is paid for assuming you keep up with all your current payments, you should be in good shape next time.

rroyce10 · June 2005

........... $7,000 down .? ... you "might" maybe get a preferred rate - or maybe not ..

I look at hundreds of credit reports a month ... It all depends on how the actual credit report looks ... the bad thing about BK's are, they have a tendency to kinda "freeze" all the information in the report .. some accounts might show as they were in 98/99 or maybe it still shows "open" even in 03/04, some might show a balance, some might show it still exists with no payments made - it can show anything ........ the problem today is, most mortgages and car loans are based on Fico scores, not reality and most lenders can't even read a credit report nowadays ...

Do yourself a favor .. get with Free credit reports.com or a similiar info source and get all 3 copies from Equifax, Trans Union and Experian ... you might be surprised, sometimes it looks like 3 different historys for the same person ....... I know that Dan1 is trying to help, but thats kind of an "ol wives tale" about BK's and other credit situations "dissolving" in 7 years ~ no such thing .. I've seen BK's in reports from 1980 .... the only person that can make, correct or change any incorrect information on your bureau is only one person -- you ....

You got some time, so take advantage of it ..

Terry

Bankruptcy and Vehicle Financing

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