Dear Bankruptcy Adviser,
Can I purchase a vehicle after filing Chapter 7 bankruptcy but before the case is closed? I will be filing soon and I know I can't keep my current vehicle, but I must have a car.
In the past, I would say you definitely could not buy a car right after filing bankruptcy. Most car lenders wanted to see the bankruptcy filer re-establish credit before approving a car loan. Now, lenders are more desperate than ever to finance vehicles. While you may not be able to get the vehicle until you receive the bankruptcy discharge notification, buying a car after bankruptcy is a viable option.
The problem with getting a vehicle immediately after filing your case is that your debts are not officially eliminated yet. The bankruptcy filing stops creditor collection activities, but the mere filing of the case does not mean all your debts are gone. You still need to attend your meeting with the court-appointed trustee and allow creditors time to object to your case or the elimination of the debt owed to them. The entire process generally takes 120 days from the date of filing until your case is closed.
However, car lenders are getting stuck with a lot more inventory than before. Cars are lasting longer and certified preowned vehicles are almost like new. So car lenders are a bit desperate to get inventory off the lot. You definitely have a better opportunity to finance a vehicle even with bad or no credit.
This does not mean you are going to walk into a new car showroom and buy the latest model, but you can likely buy something soon after filing. Many of my clients tell me they've received numerous solicitation letters from car lenders offering good deals on an automobile right after the case has been filed.
You may start receiving car loan advertisements right after filing. Contact a couple of the lenders and ask whether you are able to be approved prior to receiving your bankruptcy discharge paperwork.
While you likely do need a car right away, you may be able to find another vehicle to use for the four months that your case is open. You can set up a used car purchase to occur within days of receiving the notification that your case is closed and your debts are gone.