How to Get a Car after Filing for Bankruptcy

Cars can pick the worst time to break down. If you've just experienced bankruptcy, or are still in the middle of a Chapter 13 repayment plan, financing is going to be tricky. Improving your credit can help you get the car you need without jeopardizing your financial recovery.

Bankruptcy does serious damage to your credit score, but it doesn't last forever. While bankruptcy remains on your credit report for up to 10 years (some credit bureaus delete Chapter 13 plans after seven years), the older the bankruptcy, the less impact it has on your credit score. If you can keep your credit clean for a year or two after bankruptcy, dealerships and lenders will be a lot more willing to work with you.

You can start rebuilding your credit long before the bankruptcy drops off your report. Many people find that they can get a low-limit or secured credit card soon after their bankruptcy. If you keep your balance low (under 30% of your total credit limit) and make your payments on time, your credit report, and score, will improve, making it easier to get car financing.

If you are still in Chapter 13, you must get permission from your bankruptcy trustee before taking out a car loan. He or she will want to know why you need a new car and how you propose to pay for it while meeting your repayment obligations. Talk to your trustee or attorney about your options, and be prepared to document your need for the car as well as its costs.

Be suspicious of dealers who claim that they can get financing for "anyone": You may end up with a car loan that you can't afford and end up in the same predicament as before. Check out the reputation of dealers and finance companies online and through the Better Business Bureau before working with them. Don't let dealers perform a credit check until you've had a chance to talk to them about your bankruptcy (be prepared to show them your discharge letter). Credit inquiries hurt your credit score, so keep them to a minimum by interviewing dealers first and then working with the dealership you like best.