Getting a car loan after bankruptcy

Dear Driving for Dollars,
My Chapter 13 bankruptcy will be discharged soon. How long before I can apply for a new car loan?
-- Russ

Dear Russ,
Anyone who has filed for bankruptcy can apply for a new car loan at any time. However, it may be difficult if not impossible to get a new car loan at any interest rate during the time the info appears on your credit report. The bankruptcy discharge has nothing to do with when the accounts included in the bankruptcy will be removed from your credit report. Those accounts stay there for seven years in a Chapter 13 bankruptcy and for 10 years in a Chapter 7 bankruptcy. So in your case, potential lenders will see your bankruptcy history for seven years after your filing. While there's no set point drop in your credit score after a bankruptcy, it does carry less weight as time passes, so you'll have an easier time getting a car loan in your last year than you will in your first.

In order to get a loan, the lenders want proof that you can pay it off so they look for a steady source of income and that you aren't delinquent on other debt. You may be able to start re-establishing your credit with a smaller loan first. For a car loan specifically, consider saving your money so you can make a larger down payment on the car and thereby financing a smaller amount to make yourself less of a risk to a lender.

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