Let’s be frank — financing a car while in the midst of a Chapter 13  bankruptcy arrangement is a challenge with some added hoops to jump through. It is far from impossible, however. You’ll need to look for the right lender, and you’ll need to be prepared for higher interest and potentially a higher down payment than others are paying (as well as a fairly modest type of vehicle), but it’s certainly doable if it needs to be done.

First of all, you’ll need to file paperwork with the Chapter 13 bankruptcy trustee to get their approval to take on new debt. They will review your existing obligations, income and assets to determine whether these new payments will keep you from meeting your bankruptcy obligations. The court will usually grant this motion without a hearing provided no debt holders object, but even so be prepared for it to take a few weeks.

All of this assumes you want the car financing included in the bankruptcy plan. If you don’t, you’re free to make an independent arrangement with the new lender outside of the plan terms, though it can be a challenge finding someone to agree to this. The Chapter 13 trustee also still has a form of veto power here, if they learn you are spending more on the automobile than you are on the bankruptcy obligations.

You’ll want to look for lenders who advertise the fact that they work with people in bankruptcy, and be prepared for a double-digit interest rate that might go as high as 18%. Need assistance with your Chapter 13 bankruptcy? Contact us!