In Trouble With a Car Loan? The Bankruptcy Option.
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In Trouble With Car Loans?

While personal bankruptcy has helped millions of Americans escape from underneath loads of debt, there remain questions about how it works. Some of the most common questions are related to automobiles.

First, personal bankruptcy may be able to save your car from repossession. In addition, discharging your debts through personal bankruptcy might make you a more attractive candidate for a car loan later down the road.

In order to learn more about securing an auto bankruptcy loan, or how bankruptcy treats overdue car payments, fill out the quick form below for a free, no-obligation consultation with a bankruptcy attorney.

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Bankruptcy May Save Your Auto from Repossession

One of the most common concerns of personal bankruptcy filers is whether bankruptcy will help them keep their car, especially if they've fallen behind on their auto loan payments.

Fortunately, Chapter 13 bankruptcy may offer an opportunity to do just this. Here's how it works:

  • When you file for Chapter 13 bankruptcy, an automatic stay is issued against your creditors to prevent them from attempting to collect on the debts you've included in your bankruptcy filing. This may keep your car lender at bay, at least for a little while.
  • Under Chapter 13, the bankruptcy court will reorganize your debts to allow for a more reasonable payment plan.
  • While you are making payments on this reorganized debt, you may be allowed to keep your valued possessions, including your car, even if you had previously fallen behind on your auto loan payments.
  • If you keep up with your payment plan, you may be able to have your debts forgiven. If you are able to make your bankruptcy payment and your regular auto loan payment outside of bankruptcy, you may be able to end the threat of repossession on your auto loan.

Another common bankruptcy option, Chapter 7 bankruptcy, allows filers to receive a quick discharge of unsecured debts. State laws determine whether you may be able to keep your car and other possessions in a Chapter 7 case. Connect with a local attorney to determine if Chapter 7 is right for you.

Getting an Auto Loan After Bankruptcy

After filing for bankruptcy, you'll likely want to begin repairing your credit. One way to do this is to take out a reasonable auto loan and make timely payments on it.

Here are a few things to remember if you take out an auto loan after bankruptcy:

  • Make sure your loan terms are manageable. Just because you've discharged some debts through bankruptcy does not give you a license to spend.
  • Reasonable loan terms include both the overall cost of the car and the assigned interest rate.

Remember: rebuilding your credit score after filing for bankruptcy is an important task. One of the best ways to prove to lenders that you are credit-worthy is to pay off your loans on time. Achieve this by making sound decisions when considering an auto loan.

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