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Chicago Bankruptcy Lawyer > Blog > Bankruptcy > Does Bankruptcy Affect My Car-Buying Ability?

Does Bankruptcy Affect My Car-Buying Ability?

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Today’s vehicles last much longer than the ones which rolled out of factories in the twentieth century. Yet the average vehicle’s lifespan is only eight years. So, if you have a used vehicle in your garage, it probably will not be dependable much longer.

Bankruptcy compromises your ability to buy a car. But in many respects, this effect is overstated. For example, although bankruptcy is a very dark blot on your credit history report, this entry looks better than things like repossession or foreclosure. These entries indicate the debtor gave up. If you file bankruptcy, even a Chapter 7, you at least did something.

Before, during, and after filing, a Chicago bankruptcy lawyer maximizes your purchase options. Current and former bankruptcy debtors often have limited shopping choices. They usually also pay higher interest rates. But in most cases, it’s still possible to buy the vehicle your family needs.

Buying a Vehicle Immediately Before Bankruptcy

A few people file bankruptcy because something suddenly goes sideways. But in most cases, bankruptcy is a last resort. Therefore, most people know that a bankruptcy is in their future for at least several months.

If you buy a new or used car in the ninety days before you file bankruptcy, make sure you get the best financial deal possible. Debts incurred within three months of filing are generally nondischargeable. Bankruptcy’s fraud presumption applies to such obligations.

The trustee may also pursue fraud charges for older debts. However, since the fraud presumption does not apply, these claims are more difficult to prove in court.

Buying a Vehicle During Bankruptcy

Chapter 7 does not directly interfere with vehicle purchases, at least in most cases. The judge usually closes these cases within six or eight months. Most people can wait that long to buy a new car.

If you need to make a purchase during Chapter 7, since there is no monthly debt consolidation payment, you normally do not need the court’s permission. However, if the trustee finds out about it, which will probably happen, a new vehicle purchase could compromise your argument that you need relief from severe financial turmoil.

The bankruptcy has some indirect effects. Many lenders do not work with people who have filed bankruptcy. Your attorney can connect you with lenders who have no such restrictions.

Buying a vehicle during Chapter 13 is a bit more complicated. Debtors must prove that the additional monthly expenses will not compromise their ability to make the monthly debt consolidation payment. Furthermore, creditors often object to motions to incur additional debt. They argue that the extra money should go to debt payment instead of a new car.

Buying a Vehicle Immediately After Bankruptcy

Technically, bankruptcy usually remains on your credit report for seven or ten years, depending on the circumstances. However, most lenders only look at the last three or six months.

Once this time period passes, many former debtors have their choice of vehicles, if they have changed their financial habits. It’s also important to be upfront about your past credit problems. Before bankers or dealers request your report, tell them about your bankruptcy. Also tell them why you filed. If they are not willing to work with you, there are plenty of other lenders who are willing to do so.

 Connect with Experienced Lawyers

Bankruptcy filing normally has only a minimal effect on your car-buying ability. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

nbcnews.com/id/wbna12040753

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