It may seem impossible to get a car loan after a bankruptcy but we are here to tell you that it is possible.

In today’s world, having a functional vehicle is essential for basic things such as taking care of your family or getting to work.

After a bankruptcy, the process for financing a car requires a few more steps than before. In most cases, you will have to work with a “special finance” dealer who understands the unique challenges of a bankruptcy.

Keep reading to learn more about the requirements, process and how to find a dealer to help you once your bankruptcy is discharged or dismissed.

Find Help After a Bankruptcy

Get connected with a car dealer near you who specializes in handling bankruptcies.

Qualifying for a Car Loan After Bankruptcy

You can qualify for an auto loan after your bankruptcy has been discharged or dismissed but it might take a little more effort than if you had excellent credit.

Going through the bankruptcy process will hurt your credit score and increase your risk to lenders substantially. The goal, going through the bankruptcy process, is to prove to creditors that you can pay your bills.

The key to qualifying for an auto loan post bankruptcy is to continue working at improving your credit score and saving for a high down payment.

Improving Your Credit Score

There are several ways to improve your credit score and steps to take but the general premise is that you want to pay your bills on-time and not max out your credit cards or loans.

To improve your credit score:

  • Start to make on-time payments for any of your debts
  • Slowly work to reduce your credit utilization to less than 30%
  • Try to have a healthy mix of credit (credit cards, mortgage, auto loan, etc.)

Rebuilding your credit after a bankruptcy can take some time and bankruptcies will stay on your credit report up to 10 years.

Expected Down Payment Post Bankruptcy

A bankruptcy will bring your credit score down substantially, likely putting you in the bad credit range. Because of your new credit range you will typically be required to put down a substantial down payment to reduce your risk to the lender.

You should expect to put down at least 10% of the car’s value that you’re buying if you have bad credit. In some cases, the lender may require up to 20% or more before a dealer can sell you a car.

Can You Get a Car Loan During a Bankruptcy?

Yes, it is possible to get a car loan while going through the bankruptcy process but it can be very difficult.

In order to get a loan you will need to have your bankruptcy discharged. Any dealer that does not follow the correct bankruptcy process can hurt your credit substantially.

If you are in the discharge process and have had a 341 meeting then you can move forward finding a car. Be ready to put a larger down payment than usual and be willing to accept a higher interest rate than a normal auto loan.

Chapter 7

Filing a Chapter 7 bankruptcy will allow you to liquidate any nonexempt personal asset to pay off your debts. A Chapter 7 bankruptcy is much faster than other types and usually only lasts 3-6 months.

After you’ve gone through a Chapter 7 bankruptcy it will become discharged and you will be able to purchase a new car. Even though the bankruptcy has ended it will still stay on record for up to 10 years.

Before you start applying for financing you need to have your 341 meeting to discharge your bankruptcy.

Chapter 13

Filing a Chapter 13 bankruptcy allows you to not liquidate any and all assets but allows you to make monthly payments until your debts are gone, through an assigned trustee.

Your trustee will distribute your payments according to the creditor’s request. A Chapter 13 bankruptcy typically lasts 5-7 years but can be shorter and ultimately depends on how much debt you have to pay back.

Even though it is a bankruptcy, auto lenders tend to look more favorable at Chapter 13 bankruptcies over Chapter 7 due to how they are structured and showing that you can, or will, pay off your debts.

Just like with a Chapter 7 bankruptcy you typically will need to make sure your bankruptcy is discharged before getting another car loan. However, there are some cases where your trustee can approve new debt in the event of an accident, mechanical failure or other various reasons.

Post-Bankruptcy: Discharged vs. Dismissed

When a bankruptcy case is completed, the debtor is discharged from most debts. However, there are some debts that cannot be discharged in bankruptcy. Debts that may not be discharged include child support, alimony, student loans, criminal fines, and certain taxes. In addition, if the court finds that the debtor acted fraudulently or deliberately misled the court, it may dismiss the case entirely.


It is important to note that there is a difference between a discharged debt and a dismissed case. Discharged debts will still appear on a credit report, while dismissed debts will not.

Bankruptcy Discharged

A discharged debt simply means that the debtor is no longer legally obligated to pay the debt. A bankruptcy will be discharged at the end of the bankruptcy term after all obligations have been met.

Bankruptcy Dismissed

A dismissed case, on the other hand, means that the debtor was never legally obligated to pay the debt in the first place. From the standpoint of a lender potentially financing your car loan, it’s as if the bankruptcy never happened.

Where to Find Bankruptcy Auto Loans

While facing bankruptcy, your auto loan options can be somewhat limited, but there are still a few avenues you can explore.


You can look for lenders that specialize in bad credit auto loans. Also known as ‘subprime’ car loans, these are loans designed specifically for people with credit issues or lack of credit history. These lenders can be found at a variety of dealership types and sizes.


You can also consider in-house special finance dealerships. Dealerships that offer buy-here-pay-here and rent-to-own programs may be an easier option to qualify for.


It’s critical to find the right dealer and loan to fit your needs. Being that bad credit auto lenders may have higher down payment requirements or interest rates, getting a car loan with lower income while also facing credit challenges will require the right resources to get you into a car.

Bankruptcy Auto Loan Process

The process of getting an auto loan during or after a bankruptcy is very similar to a typical bad credit car loan. However, there will be more documentation and requirements that you have to be able to prove in order to get approved for auto financing.


Depending on the Chapter of bankruptcy you file, you’ll need either documentation of your 341 meeting with the creditors or a letter from your trustee. It’s possible that your lender may ask for further income verification or other requirements as well.


Outside of that, the financing process will be much the same. You will have to find a dealership and lender that will finance your car loan – getting a preapproval can be a great option in this case. Then, you’ll have to select your vehicle, provide the appropriate documentation and funds for your down payment, tax, title, and license fees, and complete the paperwork.

Learn More about Bankruptcy Auto Loans