Bankruptcy is a powerful tool that allows debtors to get a fresh start. What about a debtor that needs to get a new car loan in the middle of a bankruptcy? It may come as a surprise, but it is absolutely possible. Read on to learn more.
What Happens to Car Loans After a Bankruptcy is Filed
Debtors have the opportunity to decide what to do with their car loans during a Chapter 7 Bankruptcy. A debtor can keep their car and maintain payments. A debtor may also surrender their car and escape financial liability on the loan.
Surrendering a car during bankruptcy is a great idea, especially if the terms of the loan aren’t ideal. For example, a high interest car loan with lots of negative equity is the type of car loan that should be surrendered during bankruptcy.
Careful pre-petition planning ensures that a debtor receives the best possible benefit from a bankruptcy.
It is Possible to Get a Car Loan During Bankruptcy
If a Debtor surrenders their car during a bankruptcy, how is that person supposed to get around? Many debtors are surprised to hear that it is possible to get a car loan even while a bankruptcy case is pending.
That’s right. There is no legal prohibition against obtaining new credit even before a bankruptcy case concludes.
Practically speaking, it may be difficult to find lender willing to let a debtor borrow money while in the middle of a bankruptcy. But I have personally seen it happen. So I know it is possible. This is another area where careful preparation and homework will pay dividends.
Don’t Let a Bad Car Loan Follow You After Bankruptcy
As discussed above, there are options for debtors that need to surrender a bad car loan during a bankruptcy. It does not make much sense to get a “fresh start” in a Chapter 7 only to emerge from bankruptcy with the same bad car loan.
I encourage all potential bankruptcy filers to carefully review their car loan situation prior to filing a Chapter 7 bankruptcy. There are opportunities out there to save significant money!
There are many benefits to filing Chapter 7 bankruptcy in Sacramento. Please call my office at (916) 333-2222 to schedule a consultation today!
