Archive for July, 2014

Can You Keep Your Car If You File for Bankruptcy?

keep your carBankruptcy is a word that makes people shiver. It’s a nightmare, akin to admitting failure. However, for many people, it also offers a clean slate, a way out from under crushing debt and a chance to start over and do things right. Still, bankruptcy carries with it a number of scary problems.


Loss of Assets

Not only does bankruptcy take up to ten years for it to come off of your credit reports, in some cases you have to sell all your assets to pay portions of your bad debts. Your car, unfortunately, is considered an asset and your car loan must be included in the bankruptcy. So what if you need your car to get to work? What if you still intend to continue your payments?


Reaffirmation Agreements

If you want to keep your car this is possible, but you will need to sign what is known as a Reaffirmation Agreement. This agreement is a contract you establish with the court, which states that you intend to keep and maintain a debt that the bankruptcy otherwise would’ve cleared.


If you want to keep your car in a bankruptcy, you will likely need to sign one of these agreements. In fact, without it, some lenders will outright repossess your vehicle. Others will still allow you to make payments, but will cease reporting to the credit bureaus unless you fail to make payments, meaning that while usually “good debt,” your car loan will no longer help you improve your credit score. This is often the case, however, even with a reaffirmation agreement, so you need to carefully weigh your options.


Should You Sign?

There are several factors that come into play when determining whether you should sign a reaffirmation agreement. The first, obviously, is to assess whether you can actually make the payments. If you’re filing bankruptcy it’s probably because of financial distress.


The second is, do you need your car or is it just sentimental? If you’ve got a good public transportation system, you might be able to go awhile without a car while you rebuild your credit.


If you can still make payments and you determine you actually need the car, assess the amount you still owe and how long you’ve got left to pay. If you’ve only got a couple years left on your payments (2 or less), and have a low balance on your loan, it might be worthwhile to sign the reaffirmation agreement.


Keeping your car after filing for bankruptcy is a tricky situation, and a decision you must make carefully. Do not view it as an opportunity to rebuild credit, be sure that you can make the payments on your car loan, and that you really need the vehicle. Otherwise, it may be better to let it go.

Posted in: BKCarFinance News

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Your First Post-Bankruptcy Car Loan

Just because you filed for bankruptcy doesn’t mean you can’t get a post-bankruptcy car loan. The first time you finance a big purchase after filing its-possiblebankruptcy is a major challenge that many people encounter every day. Bankruptcy, after all, pretty much destroys your credit and hangs with you for a long time. How can you get someone to lend you money for car financing, for example, with a bankruptcy filing marring your credit report? The good news is, it’s possible.  You just need to keep a few important strategies in mind before diving in, and you’ll find that re-establishing your credit is within your grasp.


Know Your Priorities

You may really want to dive in and buy a brand-new, high-end car. The truth is, that may be the kind of thing that got you in trouble in the first place. Obtaining car financing depends on being able to prove that you are responsible beyond that bankruptcy on your reports. Go for the least expensive car you can that will still be reliable. That’s your priority—reliability, not luxury.


Find the Right Deal

Take the time to search for the right option. It can be tempting to grab a car for $2,000 that will get you where you need to go for a year or two, and then do the same thing all over again. This results in a string of “drive it into the ground” purchases which can be a vicious cycle of you paying for repairs that you might not pay for if you can afford a car for $10,000 that you’ll be driving for five years. Know your budget and get the best car you can for what you can afford. While you don’t want to go for all the bells and whistles, you don’t want to skimp on quality, either.


Work on Your Credit

Obtain a new credit card—there are secured credit cards that you can use specifically to rebuild your credit rating by making small purchases that you immediately pay off in full. This will help you to build a new, good credit history which is a must for getting any kind of decent deal on car financing.


Do Your Research

This is the best advice that is often ignored. Call a number of dealers in your area, explain your situation, and ask if they’ll finance you. Then get them to give you a straight answer about the terms of the financing before you ever let them run a credit check on you. Don’t let them look into your background until they’ve told you they can get you a loan. This may take a long time and require many calls, but it will be worth it in the end.

Just because you have a bankruptcy doesn’t mean you can’t finance a car. You’ll need to carefully strategize your purchase and work on your credit, but if you know your priorities and are willing to be patient and research, a new car is within your grasp.

Posted in: BKCarFinance News

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